The Honorable Mark McClellan, M.D., Ph.D., Administrator, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services

Beatrice Disman, Chairman, Medicare Planning and Implementation Task Force, Social Security Administration

Susan Everett, North Carolina Regional Coordinator, Medicare Today, Raleigh, North Carolina

Heath Schiesser, President, Prescription Drug Plan, WellCare Health Plans, Inc., Tampa, Florida

Robert M. Hayes, President, Medicare Rights Center

Bill Wolfe, Vice President, Managed Care, Rite Aid Corporation, Harrisburg, Pennsylvania

Pam Grisnik, Owner, RX Express, Grove City, Pennsylvania

SUBMISSIONS FOR THE RECORD

Alamosa Dialysis Center, Fran Koski, Alamosa, CO, letter

American College of Physicians, statement

American Medical Directors Association, Columbia, MD, statement

Brief, Cary, Campaign for America's Future, Sherman Oaks, CA, letter

Campaign for America's Future, Cary Brief, Sherman Oaks, CA, letter

Center for Medicare Advocacy, Inc., statement

Collins, Shannon, San Rafael, CA, statement

Emerick, Therese, statement

Fullerton, Linda, Social Security Disability Coalition, Rochester, NY, statement

Harrison, W. M., Durham, NC, letter

Health and Disability Advocates and Make Medicare Work Coalition, Chicago, IL, joint statement

Kennelly, Barbara, National Committee to Preserve Social Security and Medicare, statement

Kieft, Alice, Kewanee, IL, letter

Koski, Fran, Alamosa Dialysis Center, Alamosa, CO, letter

Mierisch, George, Salt Lake City, UT, letter

Miller, Jessica, Huntington, NY, letter

Muckway, Linda, Muncie, IN, letter

National Alliance on Mental Illness, Andrew Sperling, Arlington, VA, statement

National Association of Health Underwriters, Arlington, VA, statement

National Committee to Preserve Social Security and Medicare,  Barbara Kennelly, statement

National Home Infusion Association, Alexandria, VA, statement

National Kidney Foundation, New York, NY, statement

Reading, Toniann, Mill Creek, WA, letter

Rios, Elena, National Hispanic Medical Association, statement

National Hispanic Medical Association, Elena Rios, statement

Romney, Frances, West Valley City, UT, letter

Social Security Disability Coalition, Linda Fullerton, Rochester, NY, statement

Sperling, Andrew, National Alliance on Mental Illness, Arlington, VA, statement

Sutherland, Arthur, Sandy, UT, letter

IMPLEMENTATION OF THE MEDICARE DRUG BENEFIT

Wednesday, May 3, 2006
U.S. House of Representatives
 Subcommittee on Health, Committee on Ways and Means
 Washington, DC.

The Subcommittee met, pursuant to notice, at 2:05 p.m., in room 1100, Longworth House Office Building, Hon. Nancy L. Johnson (Chairman of the Subcommittee), presiding.

[The advisory and second advisory announcing the hearing follow:]

Chairman JOHNSON of CONNECTICUT.  Good afternoon, everyone.  The hearing will come to order.  Today, I am pleased to chair this hearing on the Medicare drug benefit which is so dramatically changing the lives of our seniors.  Today, more seniors and disabled people than ever before have prescription drug coverage, and it is because of the Medicare drug benefit.  This is a momentous time in Medicare's impressive history.  The largest expansion of the program is improving seniors' access to prescription drugs and thereby fundamentally improving their health and their financial security. 

The Medicare momentum we are witnessing is undeniable.  Last year, the Administration set a goal of having 30 million Medicare beneficiaries enrolled in the drug benefit.  Last month, they tapped 27 million, and hundreds of thousands are signing up weekly.  In fact, just today, 27,382 new enrollees have entered the Medicare drug plan.  Of the remaining seniors, there are another 9 million that already have drug coverage; for example, those over 65 who are active employees in the public and private sector, members of TRICARE or participants in other programs.  Seniors and the disabled are filing more than 93 million prescription drug prescriptions a month, an average of 3 million prescriptions a day. More importantly, once enrolled, seniors are happy, happy with the benefits provided.  The Association for Advancement of Retired People (AARP), the largest organization representing seniors, found that 8 of 10 seniors enrolled in the program said that it met or exceeded their expectations.  A Kaiser Foundation poll finds that 3 out of 4 seniors enrolled in the Medicare drug plan are satisfied with their plan and are not having trouble getting the drugs they need. 

Seniors are giving this benefit their stamp of approval.  This is the largest benefit expansions in Medicare's history.  So, it is not surprising that there have been some implementation pitfalls along the way.  What is commendable, however, is how quickly the Centers for Medicare and Medicaid Services (CMS) has taken ownership of the problems and addressed the issues within the first 2 months of the program's functioning through close, collaborative, consultive action with plans, pharmacists, States and other stakeholders.  As the program matures, it will need continued refinement, but enrollment numbers and survey after survey show undeniable momentum.  The real story is how seniors across the country are signing up and saving money.  It is misleading to focus on only the refinements, however, when seniors like Gail Blazewski from Cheshire, Connecticut is saving $2,000 a year.  That is the real story that the Medicare prescription drug benefit is telling across the country. 

I ran into a senior in my district recently who said to me Part D is the difference between my staying in my home and my not being able to stay in my home.  I can't tell you how grateful I have been for the work of the Congress and the work of the executive branch and their many, many partners all across the country, as I have seen senior after senior breathe a huge sigh of relief as the pressure of prescription drug cost is taken from their shoulders.  I commend CMS for such a broad coalition of senior and advocate groups working to help seniors sign up.  The AARP fielded a multimillion, quote, Reach Campaign. The National Association for the Advancement of Colored People (NAACP), the Nation's old civil rights group, not only launched a media campaign but an intense grassroots efforts to reach minority seniors and enroll minority seniors.  Today, 70 percent of minority seniors are signed up, not just in the black community, but in the Hispanic community and in the Asian community. 

CMS has 10,000 grassroots partners, and they have been conducting 1,800 enrollment events across the country each week and will do so right up to May 15, 2006.  Additionally, CMS has increased resources to keep the wait times down and beneficiary support up at 1‑800‑Medicare and Medicare.gov website. To that end, I am very pleased to welcome Dr. Mark McClellan, Administrator of CMS.  I appreciate, Dr. McClellan, how thoughtfully and effectively CMS has worked to implement this program.  I commend your decision to join forces with thousands of partners across the country, frankly, an unprecedented public‑private partnership in the history of my experience of Federal Government over many years. I appreciate the dedication of you, the employees at Medicare, the employees in the public and private sector, and all the volunteers who made it possible for so many seniors to sign up. 

I look forward to your report made on the progress of the implementation of Medicare Part D benefit, the solutions found to the problems you encountered, the efforts you have made to prepare for the 2007 general enrollment and also the next steps, because Medicare part D wasn't brought in to be part of Medicare just because we wanted to expand the benefit program, as important as that expansion. Medicare part D will mature at the same time our knowledge of our chronic disease management demonstration projects mature and at the same time, we will have implemented a great number of preventive health benefits, and that is going to enable us to take some very important next steps.  I would like to hear your comments on that future as you conclude your remarks. Also, on the first panel is Beatrice Disman, Chairman of the Medicare Planning and Implementation Task Force at the Social Security Administration (SSA).  The SSA has also addressed this issue with remarkable care, remarkable teamwork and remarkable outreach, and I appreciate your hard work and look forward to your report on how you are reaching the low‑income seniors who are the most vulnerable and the most in need of good prescription drug coverage. 

On the second panel, Susan Everett, North Carolina Regional Coordinator, Medicare Today, a partnership of more than 400 organizations, will testify to their efforts to inform seniors and enroll them in the new benefit.  Susan will share experiences with working one on one with seniors enrolling on the new benefit. Next, we will hear from Heath Schiesser, President, Prescription Drug Plan, WellCare Health Plans, Inc.  WellCare Health Plans, Inc. is offering three different prescription drug plans in all 50 States.  He will speak to the role competition has played in providing high‑quality benefits at a lower cost for seniors and taxpayers. 

Also, Robert Hayes, President of the Medicare Rights Center, a consumer rights organization, will share his experiences with assisting seniors in enrolling in the Medicare drug benefit, especially those that could benefit from the low‑income subsidy. Then, we will hear from Bill Wolfe, Vice President, Managed Care, Rite Aid Corporation, who will speak to the operations of the Medicare drug benefit since January and the actions that CMS has taken to facilitate this process. Finally, we will hear from Pam Grisnik, Owner, RX Express, Grove City, Pennsylvania.  She will speak on the role of community pharmacists and the important role they have played in this new benefit.  There are still seniors that have a questions about the program and haven't enrolled.  It is natural to have questions with a change this big. Every senior, especially those without drug coverage, should write down the drugs they take and talk to a counselor at 1‑800‑Medicare or at one of the many hotlines States are operating or at the local senior citizens center or Area on Aging. 

They should not let questions about this program keep them from finding answers and saving money, like so many of their friends, family and neighbors.  For years, Members of Congress talked about adding prescription drug benefits to Medicare.  Today, right now, a Medicare prescription drug benefit is a reality.  Thirty million seniors are benefiting from it, including 8 million who had no drug coverage before.  This is a great, historic achievement for both the health and financial well‑being of the seniors of America.  Welcome, Dr. McClellan.  Excuse me.  First let me turn to Pete Stark, and then I will come to Dr. McClellan.  

Mr. STARK.  Thank you, Madam Chair.  I am glad we finally got to holding this hearing and hope that we have the time to get into this question thoroughly.  The Medicare Prescription Drug Program (PDP) is now forecast to cost us $1 trillion over the next decade.  I hope today we could look at what we have gotten for our money, and I suspect you will find that we haven't gotten very much for that $1 trillion.  CMS will declare a victory when they tell us that more than 30 million people now have prescription drug coverage through Medicare or through a former employer and that nearly 6 million more are covered elsewhere.  They won't tell you that they have lowered the goal from 40 million, reduced it by 10 million to 30 million, so that they can claim success. 

I understand that Dr. McClellan, today, is going to declare normal at 103 million, and therefore, many of the seniors who were classified as sick are called instantly well. The "mission accomplished" that will be quoted from the deck of CMS is premature. As a matter of fact, I wondered where all of those people who counted weapons of mass destruction went when they were kicked out of the Defense Department, and there they are in CMS, finding out how many signed up in this drug bill.  With fewer than 20 million enrolled in Part D and an additional 6‑ or 7 million in an employer plan subsidized by Medicare, some people have been newly covered under the law, and that is good.  After all, it would be virtually impossible to spend the $1 trillion and not help anyone. 

I am very concerned that we have created this enormous, complicated, inefficient program that has eroded coverage for many of our most vulnerable and still not achieved the original goal of securing coverage for all.  Millions of people covered by Medicare and Medicaid, the so‑called dual eligibles, pay more today and are in plans that cover fewer medications relative to Medicaid.  These are the people who are least able to afford this benefit reduction and that, to me, is not a very kind thing for us to be doing with the $1 trillion.  A recent survey by the Medicare Prescription Network, a group financed in part by the pharmaceutical companies, found that one out of five Medicare beneficiaries now pay more for their medication than they did before the law went into effect. 

I can't say that I am surprised, that is what happens when you negotiate a law in secret, and follow the bidding for pharmaceutical industries is payback for campaign contributions.  Unless you think I am entirely negative, I do want to take this opportunity to compliment CMS for several recent improvements.  They have extended the enrollment deadline for people who are eligible for limited‑income subsidies. They have also prohibited planned formulary changes from affecting medications their enrollees are currently taking.  These are important changes.  They will help, but more is needed. 

I realize the Chair and others are not ready yet to do what we really need, and that would be a drug benefit in Medicare that would require the government to negotiate lower prices for the beneficiaries, just as we do for veterans today.  That is why today I think we should only focus on a modest change, and that is to delay the May 15, 2006 enrollment deadline and the corresponding financial penalty.  It is something we should all be able to agree on.  It is something which we on the other side of the aisle would give complete credit to the Republicans for accomplishing, and I assure you we would have no problem with extending that under what we believe is the authority that CMS has to do this administratively. 

We will be told by CMS that the May 15, 2006 deadline is important, because healthy people won't enroll without a deadline. I agree that a deadline at some point is necessary, but May 15 just doesn't seem to be the appropriate date, given all the confusion, the complexity, and the errors.  For example, the Government Accountability Office (GAO) report ‑‑ and, Madam Chair, I would like to make the GAO report that was released this morning a part of the record.  We had hoped that they would be here to testify, but we could put their report in the record. 

Chairman JOHNSON of CONNECTICUT.  If the gentleman would yield, I would be happy to include their report in the record.  Unfortunately, they could not brief us on it before, which is why they didn't testify.  They have to have the authority of those who asked for the report in order to brief others on it before they are released.  You all know not to do that.  I am happy to have it put in the record, and I am sure that we will all have our reasons to refer to it. 

[The information is being retained in the Committee files.]

Mr. STARK.  Sure, one of the things that they have showed is that for the people whom you have suggested call these numbers, that when people asked for the lowest costs, given a certain list of drugs, in 60 percent of the cases, 43 percent of the calls were unanswered or they received inappropriate responses, and 16 percent were inaccurate.  That is a 60 percent failure rate. Of all the calls that they monitored, one‑third of the beneficiaries received no answer, an answer that was incomplete, inaccurate or inappropriate. I don't think that is a record that we should rely on to adequately inform our seniors. These are fundamental tools that they need to guide them in the decision-making process.  They certainly weren't adequate to let Secretary Leavitt's father make the right choice, and that hits pretty close to home. 

The government, the Congressional Budget Office (CBO), has told us that the change we are asking would cost $2 billion over 5 years.  In a $1 trillion program, that is trump change; and it would, in fact, increase this year's enrollment, according to the CBO, by about 1 million people and reduces the penalties for 7.5 million beneficiaries that they would pay over their lifetime--that penalty comes to the Treasury, so that would be no additional funding for the pharmaceutical industry, who would get 1 million more people to sign up.  To me, that is a win-win.  Nobody gets harmed.  We pay a little more money to include these 1 million people and reduce the tax on 7.5 people.  It seems to me that would be money well spent.  I would also in conclusion, Madam Chair, like to ask unanimous consent that some of our full Committee, non-S00ubcommittee members, be allowed to participate in today's hearing. 

Chairman JOHNSON of CONNECTICUT.  I would be happy to have them participate after the Subcommittee members and if it doesn't exhaust the witnesses' time; if the witnesses' time isn't exhausted by the Subcommittee members. 

Thank you, Mr. STARK.  As I recognize Dr. McClellan, let us me just note that, Pete, in your district, 83 percent of the seniors were signed up by the middle of April.  In my district, only 62 percent of the seniors were signed up by the middle of April.  I clearly have a lot of work to do, but I am glad to see that 83 percent of yours are signed up.

Mr. STARK.  If the gentlelady would yield, half of the people who belong ‑‑ live in my district ‑‑ belong to one plan, Kaiser Permanente.  So, they were automatically switched.  That is sign A.

Chairman JOHNSON of CONNECTICUT.  That is great.  You will also see as we start this hearing, a chart that shows the number of eligible Americans signed up for other kinds of subsidy programs, Medicaid, food stamps, Slimby, Quimby, the Earned Income Tax Credit, just so we can put into context the achievement that has been accomplished in 125 days in regard to signing up seniors into the Part D subsidy.  Dr. McClellan. 

STATEMENT OF MARK McCLELLAN, M.D, Ph.D., ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Dr. MCLELLAN.   Thank you very much, Chairman Johnson, Mr. STARK.  Chairman Johnson and all members of the Subcommittee, I appreciate the opportunity to update you on the new Medicare prescription drug coverage and especially the steps that we are taking to help people enroll as we enter the final days of the open enrollment period. 

I want to thank my colleague, Bea Disman, and all of the staff at the SSA who have been working diligently to help our most vulnerable beneficiaries take advantage of the extra assistance in this program and who have collaborated with us every step of the way.  I also want to take this opportunity to thank all of you who have participated in counseling and enrollment events across the country.  I am very grateful for your personal assistance in driving awareness of Part D and helping millions of beneficiaries enroll in drug coverage to get savings and protection for the future. 

Members of Congress have been an important part of our massive grassroots education effort, and I want this partnership to continue as we now begin to drive more effective use of Medicare's new preventive benefits and the drug coverage.  This is the next step, Chairman Johnson, in turning Medicare from a traditional indemnity insurance program into a program that partners with our beneficiaries to improve their health and prevent unnecessary health care costs. 

Millions of seniors and people with disabilities are already using this money to stay healthy, to gain peace of mind.  Approximately more than 9 million beneficiaries have new individual prescription drug coverage since the program began.  Several million individuals who, because they also qualify for Medicaid or the low‑income subsidy, will also have low or no premiums in deductibles and cost‑sharings, and many millions more have more extensive and more secure drug coverage building on the coverage they already preferred as a result of the drug benefit. 

CMS estimates that almost 270 million prescriptions were filled under Part D during the first 3 months of 2006 for all of our beneficiaries with drug coverage, and numerous surveys show high rates of beneficiary satisfaction with their coverage. 

Each week, hundreds of thousands of more beneficiaries are enrolling.  We have already exceeded the initial enrollment expectations with more than 30 million beneficiaries with coverage, through Part D or a former employer, as of mid‑April. 

In addition, almost 6 million Medicare beneficiaries get drug coverage equal to Medicare's from other sources such as the Veterans Administration, and we want to work hard over the coming days to reach as many of the remaining 6 million.  As close as possible.  That is close to 96 percent of all Medicare beneficiaries.  Half of those remaining are beneficiaries with limited incomes who we will continue to reach in the months ahead with expanded partnerships with SSA and outside organizations. 

We have worked with the plans, the pharmacists, the States and hundreds of other partners around the country to educate beneficiaries and their caregivers about their choices, to help people understand how to make decisions based on cost, coverage, convenience, and peace of mind.  We put in place many outreach resources to support these efforts. 

While the vast majority of beneficiaries are already getting the savings security of drug coverage, again, we are working to reach as many more as possible between now and May 15, and that would put us at the 90‑percent‑or‑above range, with many of those left having continuing opportunities to enroll. 

To spread out any last‑minute rush to enroll, CMS and our partners are undertaking a major effort to encourage beneficiaries to take advantage of the assistance now.  In the past month, there have been more than 1,900 events per week across the country to provide beneficiaries with personalized help so they can understand their coverage options and make a confident decision about enrollment. 

Not only is enrollment way up, costs are down and benefits are better than expected as a result of competition.  Beneficiaries are able to enroll in plans that meet their needs far better than a one‑size‑fits‑all benefit package and a single drug formulary could do.  The result is coverage that serves beneficiaries well and costs less. 

Over 90 percent of beneficiaries have opted for plans other than the standard statutory benefit design.  They have enrolled in plans with low or no deductibles, flat co payments for covered drugs, and in many cases, coverage through the coverage gap. 

Consequently, even though the new drug coverage is offering better benefits, it is costing much less for beneficiaries, taxpayers, and States than had been anticipated.  The passage of the Medicare Modernization Act (MMA) (P.L. 108-173), the creation of the prescription drug benefit, posed some real changes for us in awareness, education and operational implementation that are unprecedented in scale and scope since the onset of the Medicare program 40 years ago. 

Before implementation of the drug benefit, we provided most information directly to beneficiaries using traditional tools, including the Medicare and You handbook, 1‑800 ‑Medicare and our Web site, medicare.gov.  Now, these are important pieces of information, but with the passage of the MMA we saw a need to improve and diversify our tools and to develop new strategies to reach a wider audience and to target hard to reach populations, including rural areas and minority communities. 

In addition to print, radio, and television advertisements, we have a multipronged approach to raise awareness and assist beneficiaries and their caregivers in making decisions about prescription drugs. 

During 2004, we began reaching out to develop partnerships, and now we have a network that is incredibly diversified and committed, with more than 10,000 local partners.  For several months, we held training sessions around the country to educate our partners about the benefit structures and the enrollment tools so that they could help us raise awareness and educate enrolled beneficiaries. 

We recognize that to achieve the promise of the MMA we need to reach all segments of the Medicare population, especially underserved populations and those with language and cultural barriers.  To reach them, including minority, low income, limited English‑speaking, rural and homebound populations, we entered into a contract with the National Association of Area Agencies on Aging.  Our strategies included strategy with community network‑based organizations and nine national aging organizations with local affiliates to conduct outreach to low‑income populations. 

We developed specialized campaigns for the African American, Hispanic, American Indian and Asian American, and Pacific Islander communities, using new partnerships, creating materials in other languages, and doing specialized, targeted, paid media campaigns. 

We are pleased that this is paying off with enrollment in minority populations that is running ahead of the national average.  I think that is probably unprecedented. 

We appreciate your participation in outreach, and we welcome your continued involvement as we work to reach remaining beneficiaries.  Altogether we have hosted over 22,000 events since January.  Chairman Johnson, as you mentioned this extensive grassroots‑level partnership is unprecedented.  There are many people all over the country, where they live and work and play and pray.  It has enabled us to reach beneficiaries who otherwise might not have gotten the support they needed to enroll, and it has helped millions make a decision about Medicare coverage already. 

It has helped personalize Medicare in a way we could never do from our national offices.  I think this will be a lasting and fundamental change in the way that Medicare works.  

I do want to spend a minute talking about the importance of our customer service and support.  It is always a top priority at CMS to ensure that beneficiaries and our partners get accurate and timely information.  We have handled more than 22 million calls between November 15 and April 24 of this year, and the agency takes great care in answering these calls promptly and providing accurate and useful information to callers.  That is why we have ongoing and extensive and continuous monitoring improvement activities to make sure we are providing the most effective customer support possible. 

We have worked diligently to improve the wait times and to ensure accurate information is available in a timely manner to those seeking assistance.  We have ongoing monitoring programs of actual beneficiary calls, which evaluate a random sample of hundreds of actual calls on an ongoing basis every month.  It has found that calls to 1‑800 ‑Medicare in 2006 have been answered accurately 93 percent of the time.  Actual calls, 93 percent of the time answered accurately. 

This high accuracy rate is reflected in the high rates of overall satisfaction from 1‑800‑Medicare callers.  We also do regular contact and follow up with a random sample of the beneficiaries who actually call us.  I am pleased to say that CMS customer satisfaction surveys indicate that of the bulk of callers who interact with our customer service representatives, 87 percent are satisfied with their experience. 

Our Web site, medicare.gov, has also been visited more than 829 million times in the past 4 months.  Many consumer experts like Consumer Reports, Jane Bryant Quinn, and Terry Savage of the Chicago Sun‑Times all recommend using medicare.gov as a useful tool to get information about drug plans. 

With this array of tools available, and the incredibly diverse and unprecedented scale and scope of our outreach activities around them, I am confident that we can reach more beneficiaries than have ever been possible before to help them take advantage of Medicare benefits. 

Now, I would like to make special mention of the pharmacy community before I conclude.  They are the linchpin of the drug benefit and have been tremendous in helping us.  We are working hard to meet the demands of this new program, and so we will continue to take steps to support pharmacists, like supporting the creation of new computer standards and new approaches to recognizing and promoting high‑quality pharmacy services. 

I want to thank you again for the opportunity to discuss our progress during the first 4 months of the drug benefit.  This has been a very exciting time for CMS, as we now have many new and important relationships that we are going to continue to strengthen for future outreach and education aimed at continuous improvement and the quality of care and health for the Medicare population. 

While we are pleased that millions of Medicare prescriptions are being filled every day now, we will continue to work to ensure every person with Medicare can use this coverage effectively. 

I am happy to answer any questions you may have. 

Chairman JOHNSON of CONNECTICUT.  Thank you, Dr. MCLELLAN.  

[The prepared statement of Dr. McClellan follows:]

Chairman JOHNSON of CONNECTICUT.  Ms. Disman, before we proceed we must recess for three votes.  So, it will take about 20 minutes.  Then we will pick up with your testimony and then questioning to this first panel. 

Thank you very much. 

[Recess.]

Chairman JOHNSON of CONNECTICUT  The hearing will resume.  Ms. Disman, if you will proceed.

STATEMENT OF BEATRICE DISMAN, CHAIRMAN, MEDICARE PLANNING AND IMPLEMENTATION TASK FORCE, SOCIAL SECURITY ADMINISTRATION

Ms. DISMAN.  Thank you, Madam Chairman and members of the Subcommittee.  On behalf of Commissioner Barnhart, I want to thank you for inviting me to discuss Social Security's efforts to implement the new Medicare Part D low‑income subsidy of the Medicare Modernization Act, or MMA. 

I am Beatrice Disman, Regional Commissioner of the New York Region of the SSA.  I have been in my current position since 1995, and I have actually been with Social Security since 1965, and I was there for the implementation of the Medicare program in our midtown Social Security office. 

In December 2003 Commissioner Barnhart asked me to chair Social Security's Medicare Planning and Implementation Task Force, making me responsible for Social Security's role in implementing MMA. 

As you know, Madam Chairman, Social Security was given the responsibility from Congress to take "extra help" applications and to make eligibility determinations for individuals who were not automatically eligible.  I have explained the eligibility requirements in detail in my written statement. 

Social Security was given its MMA responsibilities because of its network of nearly 1,300 offices and 40,000 employees across the country.  We are in every community, and that was a real benefit for the program as well as for our role in administering some parts of the Medicare program already. 

Upon passage of MMA, we immediately recognized the development of the simplified application for extra help was essential for successful implementation of the program.  As I have described in my written statement, we, in partnership with the Centers for Medicare and Medicaid Services, conducted substantial testing of the extra‑help application.  The paper application changed significantly over time, going through many drafts before being finalized. 

Our system staff contributed to the design of the application, to make sure the information on the form could be electronically scanned into our computers, thereby minimizing the number of employees needed to process incoming forms. 

We worked to develop alternatives to the traditional paper‑based application.  In July of last year we unveiled the Internet version of the application, allowing people to file online for help with costs associated with the Medicare drug plan.  The online application has been a tremendous success with more than 1,300 individuals daily filing for the extra help. 

Telephone inquiries were also part of our efforts to make the extra‑help application process as simple as possible.  We provided extensive training to our teleservice representatives so that they could answer subsidy‑related questions.  We developed an automated application‑taking system, allowing our teleservice representatives to refer callers directly to specialized claims‑taking employees who could take the application by phone. 

We developed a computer matching process with the Internal Revenue Service to validate resource and income‑related information provided by applicants.  Using this computer match allowed Social Security to build an application process that would not require applicants to submit proof of resources and income as long as the applicant's statement was in substantial agreement with the computer records. 

This permitted greater use of the scannable and the Internet application, and actually reduced the need of Medicare beneficiaries to travel long distances to visit our Social Security offices. 

I would now like to turn to the efforts Social Security has undertaken to inform beneficiaries about the extra help available for prescription drugs.  For example, more than 72,000 Medicare outreach events have been held and in many of these, we were certainly there with CMS and CMS was certainly at these events with us. 

As we also had targeted application‑taking events held in our Social Security field offices, I can tell you from my New York experience that we opened our offices on Saturday and stayed late in the evening to assist people to file for the extra help.  We continued to work with all the States and other organizations to identify people with limited income and resources, who may be eligible for the extra help, and to take applications from them.  We are on site in senior citizen centers, hospitals, community centers, housing authorities, adults' homes, churches, just to mention a few locations. 

Our outreach efforts are continuing because there is no deadline for individuals to file for the extra help for lower‑income beneficiaries.  Although the new prescription drug plan did not begin until January of 2006, Social Security began mailing applications to individuals who might be potentially eligible in May 2005.  The initial effort also allowed us to begin making eligibility determinations for the extra help as early as July 2005. 

As much as the initial mailing of applications was important, follow‑up telephone calls or letters to individuals who didn't return the application was just as important. 

Again, there is more detailed information in my statement.  The results of these many months of efforts speak for themselves.  At the end of April, Social Security has received applications from more than 4.9 million beneficiaries, including almost 850,000 applications that were duplicate applications. 

Of the remaining approximately 4 million, we have made determinations on 3.9 million individuals.  We have now found that 1.7 million individuals are eligible for the extra help. 

In conclusion, I want to express Commissioner Barnhart's thanks and my personal thanks to the Committee for your continuing support for the agency.  Your support for the President's 2007 budget will allow Social Security to continue to provide the kind of service your constituents have come to expect from us, not only in administering the low‑income subsidy and premium withholding for the Medicare prescription drug program, but also for our traditional services.  We look forward to working with you as we continue our efforts to reach the low‑income population. 

Thank you.  I will be glad to answer any questions you may have. 

Chairman JOHNSON of CONNECTICUT  Thank you very much. 

[The prepared statement of Ms. Disman follows:]

Chairman JOHNSON of CONNECTICUT.  We have now just passed an hour since I convened this hearing.  In that hour, 1,813 seniors have joined the Medicare Part D program.  In addition, Mr. Stark has asked me to enter into the record the Congressional Budget Office's letter that estimates that 1 million beneficiaries would enroll in Part D in 2006 if the enrollment period were extended.

[The information follows: PENDING]

Chairman JOHNSON of CONNECTICUT.  Dr. McClellan, I understand that your actuaries at CMS have done similar estimates, and I would like you to comment on this estimate and also to provide for the record the statement from the CMS actuary on this issue. 

Dr. MCLELLAN.   We will be happy to do that.  In terms of the impact on the enrollment deadline, our actuaries have concluded, like actuaries around the country find with insurance plans and other benefits, that deadlines are very important in encouraging people to act. 

The CMS actuaries concluded that without the deadline, 1.6 million fewer Medicare beneficiaries would enroll in the drug coverage and get advantages from the benefits.  I have been going around the country a lot.  I see this firsthand.  A lot of the people who are looking in the program now are people who have been putting off a decision.  Signing up for health insurance may not be the most fun thing you do in a day, but they know it is very important for their health and very important for their finances so they are doing it.  Also a lot of people with low drug costs are understandably waiting until close to the deadline.

I was down in Arlington, Texas and met a nice lady there who said she takes only one or two drugs now, but she will sign up for the coverage now so she will have peace of mind as she gets older.  She is 102 years old, but this benefit works for all beneficiaries no matter how old they are. 

We are seeing more people sign up because the deadline is there.  Now is the time when we have lots of assistance available for them, when all of our partners, all of our customer service representatives are there, between now and May 15, to help them make that decision. 

Chairman JOHNSON of CONNECTICUT.  Thank you very much.  We look forward to having that letter to put in the record, alongside the other letters.  It shows how difficult it is to estimate. 

I was interested that The New York Times had said the deadline was a useful prod for fence‑sitters.  Certainly we all know how much we intend to do something and often don't do it until we absolutely have to do it. 

I also thought it was very interesting that 75 percent of seniors who have enrolled in Plan D are either satisfied ‑‑ are either very satisfied or satisfied with the plans performance. 

 I was equally interested in, because both of you have worked very hard at getting tools out there, getting local voices in the community, enabling seniors to go to people they trust.  Indeed, in one of my senior citizens centers they don't want the choice because they like the pool of people who are so well trained, and they would rather wait their turn with their local advisers.  That has worked very, very well. 

All of the grassroots training that you have done is very important.  Yet in the Kaiser Foundation poll of April 6th to 11th, they found that 54 percent of those who had chosen a Medicare drug did so on their own.  That is interesting to me, because in my office we have had people call and say oh, this is so confusing, and this is so confusing.  When we ask them have you tried, they say, oh, no.  When we have them try or when I see them at sign‑up things, they say it isn't so confusing. 

So, it is unfortunate that so much print and breadth of public leaders has been devoted to basically scaring seniors that was dangerous and difficult; when it is, it certainly is something you have to put your mind on, but the people you have gotten out there to help one on one have made all the difference; and that many seniors, we forget, many seniors are able to use the computers. 

In fact, some of the advisers who signed up, one I met recently, was a former human resources developer.  So, we have had some very good success not only with getting seniors to sign up, but with generating support in the community for helping one another.  That has been wonderful to see.  Frankly, I haven't seen that level of just communities coming together to help each other in a long time.  We will come back later on to some other aspects of the plan that will help it. 

Right now, I will recognize Mr. STARK. 

Mr. STARK.  Thank you, Madam Chair.  Could I just borrow this?  Look at those aluminum tubes, just right out of the State Department testimony. 

In your benefit design, as I understand it, about 86 percent of the stand‑alone plans have a doughnut hole or some coverage gap, and about 8 million people and change have enrolled in stand‑alone plans. 

Can you give me an idea, or can you get back to me as to how many of these 8 million in stand‑alone plans still have a doughnut hole or some form of coverage gap, or do you know, approximately? 

Dr. MCLELLAN.   I can get you that number, approximately, in just a minute.  What the beauty of a program with choice is of the options out there, people don't have to choose any one of them that they don't like, and people are disproportionately enrolling in the plans that fill in the doughnut hole, just like they are disproportionately enrolling in plans that provide other benefits.  That is a big extra help for people who have high expected drug costs.

Mr. STARK.  Okay.  Again, my concern is not that we can't help some people, as I said earlier.  You throw $1 trillion at 40 million people, somebody has got to get help besides the pharmaceutical industry.

 I have trouble with ‑‑ and I hate to tell you this, but you probably already know it ‑‑ your boss, Secretary Leavitt, just some moments ago, in his testimony in the Senate, before the Health and Human Services Appropriations Subcommittee, said, I think definitively as Congress Daily put it, said:  There ain't going to be any extension. 

I was kind of hoping you guys would have an epiphany, is that what it is, John, in the last ‑‑ in the eleventh hour, and save a lot of those seniors from the penalty. 

 if I am correct in this assumption, I know you have stated in a variety of forums and ways that the penalty is necessary, basically to prevent adverse selection, for me to stay out of the plan until I know I am going to need diabetic drugs or chemotherapy and then sign up.  That is why I would agree with you and everybody else, and at some point, a penalty, like we have in Part D.

I am not so sure, maybe you could convince me otherwise, that we lose a lot by letting people go to January without a penalty.  If what you are suggesting is out of these 7‑ or 8 million people, that they have got this all figured out, my guess is that with their shoes and socks on, they can do the math; and the penalty would cost them more than what they would spend in 8 months in premiums. 

I am sure that is the case in any of these plans; that if you look at some life expectancy beyond 5 years, to say, jeez, I am going to have a penalty of 10, 12 percent, what it could run, for the remainder of my life, or I have the option of paying for just an extra couple of months, even these guys are going to figure out that they are probably on the better side of the math, if they are that sophisticated, to take the lower premium and not gamble.   you may have figured it out differently. 

If, though, you will agree with me, without a question of fault, that there is some confusion, there is some waiting because of lack of resources to take everybody and get them the information, the costing they need, instantaneously ‑‑ and I don't expect we could do that.  Quantify for me the dollar harm, if you can, that you could see in giving these people another, basically, 7 months, and forgoing that penalty until the first of the year. 

You have done it for some already.  My guess is that in the long run, we would have people who would have done a better job of selecting the right plan, and the government would lose some penalty dollars, and as CBO tells us, $2 billion over $5 billion.   if you are talking about a $1 trillion program, I would submit that that is not very urgent to us, and we may be better off with a better‑served population. 

Quantify for me, the other side of that, which I know you are on. 

Dr. MCLELLAN.   Let me try to throw out a few numbers.  First of all, I think you are absolutely right; for someone who is thinking about getting this protection, because the premiums have turned out to be so low ‑‑ in your district it is only around $10 a month and all over the country it is under 20 ‑‑ this is a very inexpensive way to get peace of mind for the future. 

Now, in terms of the number of people that are affected here, as you mentioned there are about 5‑ or 6 million who have not yet signed up and who don't have coverage from another source. 

Out of that group, more than half are eligible for the low‑income subsidy.  As we have already talked about, we will be continuing and redoubling our efforts to reach that population.  We have new partnerships that are really getting underway right now.  There, we will continue to be getting them enrolled as quickly as we can, before or after May 15.  That takes us down to 2‑ or 3 million beneficiaries, which is well under 10 percent of the total Medicare population.  We are seeing hundreds of thousands of people sign up each week.  We are seeing a surge in the number of our phone calls that we are getting now, a surge in the use of online enrollment.  People clearly are starting to focus in with the deadline.  I think we are going to get ‑‑ have an opportunity to get most of those people enrolled now. 

The reason that I think ‑‑ well, let me give you one more important number to focus on; that is the $1,100 that is the average savings a beneficiary will get this year from the drug coverage.  If you talk about the penalties, the penalties come from beneficiaries not getting this assistance as soon as possible. 

If we lose 1.6 million people, which is most of this population that is left ‑‑ that is actuaries' estimates ‑‑ that is forgoing billions of dollars in drug savings that our beneficiaries really need.  Between now and May 15 is when all of the assistance is available to help them make a good choice and start saving money.  That help is not going to be available after May 15. 

So, the result is potentially ‑‑ I think that is the right number ‑‑ $1 billion in lost opportunities to save on the drugs.  It is not a large part of our overall population.  I am not as concerned about the penalty amounts as I am about our beneficiaries getting help with their drug costs, making a confident decision about their coverage as soon as possible.

Mr. STARK.  If the Chair would indulge me for just another minute. 

CBO tells me we get another 1 million people in.  It is dueling statistics, but it is a gamble.  My question to you is twofold:  One, let us gamble on the side of getting people in.  They will be better off for it as you and I would agree. 

Secondly ‑‑ and I am sure Ms. Disman could remind you if you don't know ‑‑ but there is not a one of us here on this dais who hasn't had a town meeting where somebody has come in and waved this direct‑mail solicitation to help them solve a notch problem. 

What you may very well be doing for us, and you will earn the enmity of everybody on this dias, is creating a whole new batch of notch babies, who, for the next 10 years, will be coming to our town meetings and saying, why do I have to pay this extra money?  I don't think there is anybody here who will disagree with this ‑‑ you would help us a lot, Doc, if you could find a way to do away with this potential notch. 

Dr. MCLELLAN.   I very much appreciate your commitment to helping everyone possible save under the drug benefit.  I am sure we will keep talking about this not just now, but soon after May 15 as well. 

Chairman JOHNSON of CONNECTICUT.  I would like to recognize now Mr. McCrery, in whose district 73 percent were signed up in the middle of April. 

Mr. MCCRERY.  Thank you, Madam Chair.  I thank both of you for appearing today.  I also want to say what a good job CMS and Social Security and the Department of Health and Human Services (HHS), for that matter, have done since the early rollout of this program. 

We all know there were problems with the early rollout, everything from speedy payment, pharmacies, to dual‑eligible seniors having problems, some drugs being dropped or not covered.  CMS, HHS, jumped on that with both feet, and you haven't let go since.  You have just done a fantastic job of admitting that there were problems and getting after them and solving them. 

The SSA has done a wonderful job of reaching out to seniors and offering your outreach to seniors all across the Nation and trying to help seniors understand this program and to get help getting signed up for this program. 

So, I think, particularly for those of us from Louisiana, it is refreshing to be able to compliment Federal agencies for a change.  You certainly deserve it. 

Dr. MCLELLAN.   Thank you. 

Mr. MCCRERY.  Dr. McClellan, you talked about the premiums.  I think, originally, weren't premiums projected to be about $35 or $37 a month? 

Dr. MCLELLAN.   Thirty‑seven dollars a month, yes. 

Mr. MCCRERY.  Thirty‑seven dollars a month.  Now they are between $20 and $25, on average? 

Dr. MCLELLAN.   That is right.  It is about $25, on average.  Overall, the Medicare Advantage plans have premiums that are significantly lower than that, on average. 

Mr. MCCRERY.  What do you think accounts for the difference in the original projections and what is reality? 

Dr. MCLELLAN.   I think it is two things.  First of all, it is the strong competition that we have among the drug plans.  They know that they have got to offer strong discounts, low‑cost effective coverage, or they are not going to get beneficiaries. 

Second, we have seen some very impressive shopping behavior by our beneficiaries.  They are overwhelmingly enrolling in plans that are relatively low cost.  That is good news for them.  They are getting much lower premiums as a result.  It is good news for taxpayers because the cost of the benefit is coming way down as a result. 

Our Trustees Report, issued this week, pegs the drug benefit cost to be 20 percent lower than had been projected as recently as last year, before these premium bids and before we saw the actual choices that our beneficiaries are making. 

Getting back to Congressman Stark's questions, 1 in 4 of our beneficiaries is signing up for a plan that has coverage in the gap.  So, the plans are responding, not just with lower costs but also with coverage, more like with what many people want.  So, I would give a lot of credit to our beneficiaries making informed choices.  It takes some effort, but I would also give a lot of credit to all of our partnerships in networks to help people make an informed choice.  That can be as simple as calling 1‑800‑Medicare or going to one of these thousands of events around the country.

Mr. MCCRERY.  So, private sector competition seems to be working after all.

Dr. MCLELLAN.   Private sector competition plus beneficiaries choosing the coverage that they want, not the coverage that others tried to design for them. 

Mr. MCCRERY.  Are you familiar with the recent survey from the pharmacy benefit managers trade group, Pharmaceutical Care Management Association, in which they track the top 25 drugs purchased by seniors and show the costs at retail pharmacies and under the program and through mail order programs? 

Dr. MCLELLAN.   Yes, I think I have seen that, sir. 

Mr. MCCRERY.  They show discounts of 35 percent to seniors at retail pharmacies ‑‑ seniors who are in the Part D program ‑‑ and 46 percent through mail order.  A lot of seniors can do mail order because they have maintenance drugs that they know they will need every month so they can do it through mail order.  Sometimes they have to go to retail pharmacies, but a lot of them can get it through mail order.  So, that is a big savings that they can get through mail order. 

However, CMS, I understand, for those that signed up for the lowest‑cost plans, they can get discounts of 57 percent to 71 percent in those low‑cost plans.  That is a huge savings for seniors.  I think you earlier stated that the average savings per senior who signed up for Part D is $1,100; is that right? 

Dr. MCLELLAN.   That is right, it is 50 percent.

Mr. MCCRERY.  It is about $100 a month these seniors are saving.  That is just the average.

Dr. MCLELLAN.   One other way to look at it, if you don't mind, is our actuaries in February issued their projections for national health expenditures.  For 2006, the first year we have full implementation of the drug benefits, their estimates of total prescription drug spending in the United States have come down significantly because of exactly what you mentioned:  the substantially lower prices that seniors are now getting on their drugs. 

Even though seniors are getting millions more prescriptions filled because of the coverage, it also brings down the cost of drugs, so it is many more prescriptions, but less total spending on prescription drugs in this country as a whole this year, because of the drug benefit. 

Mr. MCCRERY.  What is happening ‑‑ I will see if you agree with me ‑‑ but what is happening is seniors are now in pharmaceutical plans, drug plans, that are like the one I had through the Federal Employees Benefit Plan. 

I was paying less for my drugs than I would have paid had I not had a plan and just walked down to the corner drugstore and paid retail for it, because I got a discount through my health plan.  Now we are giving seniors a discount through their health plan, Medicare, through Part D. That is what is happening. 

Now, my time is out, but I hope somebody will talk about the low‑income seniors and how we are taking some of the burden off the States, who were previously paying the cost for those seniors, and how if the States want to, they can supplement Part D and actually make those seniors whole or even better off than they were.

Dr. MCLELLAN.   Many of them are. 

Mr. MCCRERY.  Thank you.

Chairman JOHNSON of CONNECTICUT  Thank you. 

Now I would like to recognize Mr. John Lewis of Georgia who has about 69 percent of his seniors ‑‑ sorry, 69 percent of the seniors in his district signed up.  Mr. Lewis. 

Mr. LEWIS.  Thank you very much, Madam Chair. 

Dr. McClellan, in your response to the question raised by my colleague from Louisiana, are these the same actuaries who said that this plan was going to cost about $400?  Are they using the same people? 

Dr. MCLELLAN.   Those are the same people.  That was the April estimate from 2004 to 2013.  We are now looking at 2006 to 2015 and the cost projections are right in line with what the actuaries had forecast back then. 

Mr. LEWIS.  You are really telling us that these wonderful, unbelievably qualified people hit the dime on the head? 

Dr. MCLELLAN.   Very close to their original estimates.  Back in February, when the President's budget came out, our actuaries compared a comparison. 

Dr. MCLELLAN.   The trillion dollars I think that Congressman Stark ‑‑ I am not sure where he got that from.  I am sure he can explain more clearly than I.  some estimates are of the so‑called gross costs of the benefits that do not count the savings from premiums, that do not count the savings from State payments for a portion of the costs that they would have incurred, that do not count all the savings in Medicaid. 

If you look at the net cost of the Federal Government, as our actuaries did in that comparison in February, which we would be delighted to share with you, they are roughly in line with what had been forecast a couple years ago. 

Mr. LEWIS.  Doctor, let me ask you, have you seen the GAO report that was released today? 

Dr. MCLELLAN.   I have.

Mr. LEWIS.  Do you care to comment on the report? 

Dr. MCLELLAN.   Thank you for asking.  I do have a few comments on it.  While I think it is very important for us to look at input and feedback from any source, I am very concerned about the report being incomplete and inaccurate and out of date, at least as some people are interpreting its findings.  I can tell you a little bit about that.

Mr. LEWIS.   Doctor, the report is saying that much of the information that was sent out by you and CMS was inaccurate and misleading, incomplete, too complicated for seniors.  It suggested that many of the seniors that you want to sign up, they have only a fourth‑grade reading level, and that much of the information you sent out was for people who could read at a seventh‑grade level or maybe a college level.  Do you care to comment? 

Dr. MCLELLAN.   Absolutely.  Again, there is a lot more I can say about this, but on the specific point that you raised about reading level, first of all, we have not been able to see the methods that GAO used.  We asked them to share them with us, but they would not release them.  If it is as described in their summary statements, their reading level determinations are based largely on syllable counts, the number of syllables in the words in the documents that they reviewed, what we found is that is a partial but not complete way of looking at how easy materials are to understand.  There are some words that our beneficiaries need to know that have multiple syllables that many of them do understand, words like "Medicare" or "prescription" or "beneficiary."  In cases where we use these, we will use the words to make sure that we are clear and accurate about what beneficiaries need to know.   it does mean the syllable count goes up. 

We have had our materials reviewed by many independent groups that focus on plain language and clear communications; and those results which we compiled in our response to the GAO had very different conclusions about the ease of readability of the materials.  In fact, the Medicare new handbook has won awards for its plain language. 

Mr. LEWIS.   to consistently tell people to go on line; if you want information, go on line.  Apparently 70 percent of the people that receive Medicare have never been on line and they never use a computer.  They do not know anything about a Web site or iPOD, whatever these things are. 

Dr. MCLELLAN.   iPOD things, whatever they are.  I could not agree more that is why going on line is only a small part of our diverse grassroots outreach campaign.  In Georgia we are partnering with faith‑based organizations, counseling groups like Georgia Cares and the Georgia health insurance counseling organizations, to get into people's neighborhoods for face‑to‑face talking about what the drug benefit means for them. 

People can also call us anytime.  We have more than 6,000 customer service representatives, and that is why we have been able to get our minority enrollment, and that is why you have been able to get enrollment in your district to run ahead in our national average in many respects. 

Mr. LEWIS.  Do you think all of these are exceptional circumstances that would justify extending the May 15 enrollment deadline? 

Chairman JOHNSON of CONNECTICUT.  Excuse me.  It has just been called to my attention that Dr. McClellan has to leave at 4:00.  There are enough Subcommittee members here so that if we each stick tightly to 5 minutes, we may not all get to question him.  So, I would like to ask you to suspend the rest of your questions, since your time has expired, and anyone else who can keep their questioning to 4 minutes out of respect for other members so we can get through everybody, that would be great. 

Dr. MCLELLAN.   We will be happy to answer more in writing.  This outreach is very important to us.

Mr. LEWIS.  Thank you. 

Chairman JOHNSON of CONNECTICUT.  Thank you.  Mr. Johnson. 

Mr. JOHNSON of TEXAS.  Thank you, Madam Chairman, I appreciate it.  Listen, I think you guys have done a super job and I do not know if you have answered the question yet, but the effect of eliminating the May 15 deadline; have you talked about that already? 

Dr. MCLELLAN.   We have and how that would reduce enrollment in the program. 

Mr. JOHNSON of TEXAS.  How do you propose that half of the beneficiaries are not aware of the deadline? 

Dr. MCLELLAN.   At this point, about 85 percent‑plus of our beneficiaries have drug coverage that is secure.  Mostly it is through the new Medicare drug benefit, and those beneficiaries do not need to focus at all on any deadline.  They are in coverage.  They are not going to pay any penalties.  They got protection for the rest of their lives against high drug costs. 

For the ones who are left, it is about 15 percent, and even half of those qualify for the low‑income assistance, and they will have chances to enroll after May 15.  So, it is really only a small part of our population that we still need to reach.  We want to make sure they know about the deadline, but most people have moved on.  They are using the coverage, they are saving money, and they are satisfied with it. 

Mr. JOHNSON of TEXAS.  I agree with you.  I would like you to emphasize that the lower income do not have a deadline, in effect.  You will help them get the coverage regardless of the time frame.

Dr. MCLELLAN.   That is right. 

Mr. JOHNSON of TEXAS.  What would happen among plans if the Secretaries were allowed to negotiate prices? 

Dr. MCLELLAN.   Congressman, I get asked that question a lot, so I have made a point of discussing it with our actuary and his staff who did an independent evaluation of proposals.  As he reiterated again recently, there is no evidence that government negotiation would lead to lower prices than what we are seeing with a strong and aggressive price negotiation that the drug plans have to use in order to get people to enroll in their plans.  They have gotten prices way down and compared to our experience in Medicare part B, where Medicare did cover some drugs using price regulation for a long time there, we have moved to a new competitive system for pricing the drugs and we have saved billions of dollars.  So, according to our actuaries there is no evidence that price negotiation would drive down costs any more. 

I think it is especially important to be careful about government controls on access to drugs, and which drugs you take, when there are so many new medications coming along and when beneficiaries being able to get access to the medicines they need is constantly changing and needs to stay up to date.

Mr. JOHNSON of TEXAS.  Choice and free enterprise work, do they not. 

Dr. MCLELLAN.   It seems to. 

Mr. JOHNSON of TEXAS.  Thank you very much.

Chairman JOHNSON of CONNECTICUT.  Thank you very much, Mr. Johnson. 

Mr. DOGGETT. 

Mr. DOGGETT.  Thank you very much, Doctor, for your service and for your testimony.  I wish you well in signing up as many people as you can possibly get.  As much as I deplore what I think are many of the deficiencies in this legislation, I personally join in that effort to try to get as many people in the south Texas area that I represent signed up. 

Dr. MCLELLAN.   Thank you. 

Mr. DOGGETT.  Just continuing with Mr. Johnson's line of questions then, I guess you have concluded, then, based on talking to the actuary, that we should repeal the negotiation authority to the Veterans Administration that gets less expensive prescription drugs for our veterans than any of these plans provide under Part D.

Dr. MCLELLAN.   I do not think I would say that.  The Veterans Administration is a good program for veterans.  It works well for them. 

Mr. DOGGETT.  It sure is.  You are familiar with the Families USA study that it is so good that it provides prices on, I think, the top 20 most prescribed pharmaceuticals that are about half what your best plans under Part D are providing. 

Dr. MCLELLAN.   For the drugs that are on the Veterans Affairs (VA) formulary, that is true.  A lot of drugs are not. 

Mr. DOGGETT.  That is a pretty significant savings.  Even by any standard a 50 percent savings ‑‑ I think to actually be accurate, it was 48.2 percent ‑‑ less than the government is paying through the veterans program, where we negotiate prices, than we are paying under this great system that has been set up that we are talking about today.  That plan also is one that has been evaluated by our staff over at the Government Reform Committee.  They show that actually there has been an increase in prices of these Part D plans from December to February. 

Does your office study the changes in prices that are available? 

Dr. MCLELLAN.   We have been watching that very closely.  We sent a response letter to Consumers Union, who also picked up on part of the same study that you saw that pointed out some of the problems with minority staff's study on the Government Reform Committee.  Basically the only price changes that we are seeing are changes in the so‑called Average Wholesale Price for a drug that applied to every program, including the VA.  Many Medicare beneficiaries have chosen plans with flat copays that stay the same for the whole year for their drugs, and so are protected even from those kind of changes in prices.  We would be happy to share with you the details of that.  The prices and savings have remained stable over time, overall, and they have actually increased.

Mr. DOGGETT.  I think it would be helpful to add as you filed other documents with your testimony, those studies as well ‑‑

Dr. MCLELLAN.   We will get that letter into the record.

Mr. DOGGETT.  ‑‑ that your actuary has provided that are critical or are objecting to price negotiation.

Dr. MCLELLAN.   We are happy to do that.

Mr. DOGGETT.  As far as the study that my colleague, Mr. Lewis, was just asking about on the GAO, I understand you do not have all of your discussions back and forth between your staff and their staff about how they did what they did, but you are aware that they reported that one 1 of every 3 times that someone calls in to CMS, they get the wrong answer or they get no answer or they get an answer that is incomplete and inappropriate.

Dr. MCLELLAN.   Well, I would like to just correct your statement, because that is an incorrect interpretation of what the GAO did.  They did not look at any actual calls that beneficiaries were making.  They made up five questions and they looked at those questions which did not even apply to most of the tools that we have available.  They did not really even look at our toolbox.  They dusted off a hammer and got that out and did not even look at our power tools.  Our power tools, which are what most beneficiaries use when they call us, rely on personal information from the beneficiary.  They tell us who they are, and then we give them personalized support in making a decision.  The GAO did not even look at any of those calls, and that is the vast majority of calls that come into us. 

If you look at the actual calls coming into the Medicare program, the satisfactory rate of beneficiaries that call us with the information they get is 87 percent and the ongoing evaluations of the accuracy of the answers is 93 percent.  So, that analysis was not based on actual calls by actual beneficiaries, which is what we are really focused on.

Mr. DOGGETT.  Perhaps we can pursue that ‑‑ since the time is up ‑‑ in a future hearing, because the actual report refers to incomplete, inaccurate, and unusable answers.  I have hope you will file your response with your testimony. 

Dr. MCLELLAN.   It is with the GAO report.  You can see it now. 

Chairman JOHNSON of CONNECTICUT.  Thank you, Mr. Doggett.  The record really should note that the VA formulary excludes 20 of the 33 most common brand‑name drugs used by seniors, and the VA system delivers drugs to only 429 VA pharmacies; whereas the Medicare prescription drug benefit is delivered to 54,371 pharmacies. 

Mr. CAMP. 

Mr. CAMP.  Thank you, Madam Chairman. 

Welcome.  Dr. McClellan, this GAO report that we have heard referred to, it seems many of the observations they made were the early days of the program.  How do you respond to the fact that it seems that GAO's findings really apply to information that is out of date? 

Dr. MCLELLAN.   It is very much out of date.  In our response to the GAO report, we listed what we have done on each of the four specific recommendations that the GAO made.  Some of these were kind of technical recommendations.  One of the main reasons they scored one question as being an inaccurate response is because we talked about the savings from generic drugs, for example, and they thought, well, if there is a generic version of a drug, you should not automatically tell a beneficiary about that.  I personally think that is exactly what we ought to be doing because they can offer so much savings and they are exactly the same drug, but we have since modified our script to let people look first at the overall cost of their brand‑name drug if that is what they really want. 

Again, I do not think that is the right thing to do, speaking as a doctor, if you want to save money safely on your medications.  So, in that area, in each area we have made major further steps in improving our tools since the report was done in January. 

Mr. CAMP.  I want to thank you for all the hard work your Agency has done in enrolling millions of beneficiaries in the prescription drug coverage.  I also want to personally thank you for the responses to my office that have been very very timely.  Over 70 percent of the seniors in my district are benefiting from the program and surveys show an overwhelming majority are pleased with their coverage. 

My question is how is CMS and HHS working together to expedite approval of the patient assistance program?  I have heard some concerns from people who were covered by one of the plans in the past.  That is obviously changing.  Can you comment on that? 

Dr. MCLELLAN.   I sure can.  The Office of the Inspector General has provided a clear road map for how manufacturers can continue their assistance programs, in addition to Part D, just as they had before.  I am very pleased that a number of drug manufacturers like Schering‑Plough, like Merck, have come forward and done the right thing and continued their programs. 

I personally think it is unacceptable for any drug manufacturer to use the start‑up of Medicare Part D as an excuse to cut back on assistance to beneficiaries who still could get help in addition to Part D.  This should be a win‑win for the manufacturers and for the drug beneficiaries when it comes to assistance programs, because many beneficiaries who previously needed the manufacturer program now qualify for extra help.  They have got comprehensive payments for their drugs.  There are still some that have incomes between, say, 150 or 200 percent of poverty that will get some help from the Medicare drug benefit but could use the assistance program in addition. 

The Office of the Inspector General has provided a clear road map for how manufacturers can do that.  Some of them, like Merck, did not even need to get a specific opinion for their own program because they are following the road map.  That is what I hope all manufacturers will do. 

Mr. CAMP.  Thank you.  Quickly, before my time expires, the pharmacists have been a big help in this program and many are concerned about timely payment.  How is CMS addressing those issues? 

Dr. MCLELLAN.   We are firmly supporting pharmacists and making sure their contracts are enforced for timely payment.  If any pharmacist is having difficulty with a drug plan meeting the terms of their contract to pay on schedule, they should let us know.  We have handled some complaints in that regard and gotten them resolved.  At this point we are seeing a very low number of complaints related to payments being made according to a contract. 

Mr. CAMP.  Thank you very much. 

Chairman JOHNSON of CONNECTICUT.   Thank you.  It is very nice that the last three members to question have either 71 or 72 percent of their seniors signed up in this program. 

Now we turn to Mike Thompson of California.

Mr. THOMPSON.  How many people do I have signed up? 

Chairman JOHNSON of CONNECTICUT.  In your district, 72 percent are signed up.

Mr. THOMPSON.  Seventy‑three thousand four hundred and nine‑five, according to your data, Doctor.  Thank you for providing that.  What I do not know is how many of these 73,495 people that you have told me have signed up were not getting some sorts of benefit before?  We have asked you or your office for a breakdown in those numbers, and we were told that that is not available.  Will that be available sometime soon? 

Dr. MCLELLAN.   I will certainly look into it.  I know we have made available that information at the county level and we will look into providing some additional numbers.  We have put out an awful lot of information lately of these county‑level breakdowns.  

Mr. THOMPSON.  I would be interested to have the county level.  I have got all or part of seven counties, and I would love to see it on that basis, if nothing else because it is one thing to state for certain, as the Chair has been doing, that these people have received coverage under this program.  Maybe they have.  I hope they have.  I hope the more people that we can get in the better, but I think it is important for us to know the facts of this.  How many are getting it now that didn't have coverage before?  

Dr. MCLELLAN.   Many are getting much better coverage.  Many people in your district with Medicare Advantage plans have much more comprehensive coverage.  Many have much more secure retiree coverage.  That coverage had been going away.  We are keeping it in place. 

Mr. THOMPSON.  If you give me the data that we asked for, we won't have to argue it across the dais.  We will have it for sure. 

Doctor, is it your understanding ‑‑ and you may have covered this while I was out at another meeting, and I apologize if you have ‑‑ is there any interest in, or do you suppose that we are going to extend this May 15 deadline? 

Dr. MCLELLAN.   We do not have the authority to do that.

Mr. THOMPSON.  Do you see, from your vantage, that happening? 

Dr. MCLELLAN.   As I said before, what we are seeing, what I see when I go around the country is seniors who are focusing in on this because the deadline is coming up.  Most people do not do their Christmas shopping in August.  They wait until closer to the deadline, and now is when we have put tremendous resources and all of our partners around the country and in your district are doing a lot of work to help people get their questions answered and make a confident decision, so now is the best time to look into the program.

Mr. THOMPSON.  I appreciate that, but I just want to point out that there was another deadline that has come and gone, and that was the deadline for States to take action to get folks into the program.  The States, unfortunately, did not have a Federal Government partner that met its fair share of that deadline, and you guys did not meet your deadline, so different States have had to come up with funding to provide prescriptions to folks who otherwise would not have had prescriptions.  As a matter of fact, in California there has been 815,700 prescriptions paid for by the State, at a total of $60 million, just in the month of April; 178,000 at $15 million. 

So, I would hope that we are not holding the beneficiaries to a different standard than the Federal Government is having to hold up to.  I would be interested in knowing when States, California included, can expect to get reimbursed for this. 

On the issue of partners, I just want to point out that one of the best partners has been the State Health Improvement Plans (SHIPs), Health Insurance Counseling and Advocacy Programs (HICAPs) in California.   If you look at the numbers, they are doing 20 times the normal caseload and they get about 80 cents per beneficiary for the work that they do.  I would argue that you would have just terrible statistics if it were not for these HICAPs and the like organizations in other States. 

Now they are going to experience a further cut in their benefits.  These are people ‑‑ I have one small county that used to get 200 calls a month.  Now they are getting 200 calls a day, and we are going to cut their funding.  How do you determine what the funding is? 

Chairman JOHNSON of CONNECTICUT.  I am sorry, I have to cut you off.

Mr. THOMPSON.  Maybe you can get back to me. 

Dr. MCLELLAN.   I want to make sure these are issues that I can clearly respond to.  With respect to the State payment, we worked out a framework and a schedule for carrying out that framework with a bipartisan group of State Medicare directors.  We are just kind of following their lead so that the States will get paid back in the way that is easiest for them.  Your Medicaid Director, Stan Rosenstein, was one of the members of that Committee.  We are implementing that on schedule.  California sent in their first round of data for that process, and we will be carrying out the reimbursement according to schedule for the States that followed through on the approach that they wanted for this reimbursement process. 

With respect to partners like HICAP, I could not agree more that they are tremendously valuable assets and partners in making this program available and effective for all of our beneficiaries.  We have more than doubled the funding for HICAP over the last few years.  I will permanently keep that funding level high.  We have also vastly expanded the use of other partners in your district, around California and around the country, to help take some of the load of more personalized connections with our beneficiaries.  We will keep that in place too. 

Right now we are helping people find out about drug coverage.  In the years ahead, it will be great for helping them close the prevention gap by using our preventive benefits and our drug benefits more effectively.  So, this is a permanent new part of the Medicare program, and I want to support them much more strongly than has ever been the case in the past.

Chairman JOHNSON of CONNECTICUT.  Mr. Ramstad. 

Mr. RAMSTAD.  Thank you, Madam Chairman.  Thank you for your important leadership on the Medicare prescription drug benefit from day one.  I also want to thank our two witnesses for your excellent testimony. 

Dr. McClellan, my home State of Minnesota, thanks to the leadership of Governor Pawlenty, was one of the States that stepped up to the plate with Medicaid dollars to fill the gaps when there were initial problems with the dual‑eligible population.  I am sure you agree that seniors and people with disabilities never should have faced those difficulties.  There were really some major problems during the start‑up of the program.   to your credit, when the States started filling up the gap, you stepped in and announced that CMS would reimburse States that did step up to the plate to fill the gap with dual‑eligibles, and I appreciate your leadership at that time as well. 

I have two questions.  One, can you assure us that CMS is taking every possible step to ensure that dual‑eligibles never face those obstacles again?  Second, when can the State of Minnesota expect to be reimbursed? 

Dr. MCLELLAN.   On the first question, as you said, starting on January 2 we began taking further steps to address the issues that arose for some of our beneficiaries.  While the vast majority of our beneficiaries have been using the coverage effectively from the start, too many were having difficulty at the beginning, and so we took new steps like implementing new data transfer procedures with the States and the drug plans. 

We now do bimonthly checks, twice a month, to make sure the plans with dual‑eligible beneficiaries have up‑to‑date and complete information on their enrollment data and their copayment data to make sure those steps are done correctly. 

We have also worked with the States, where there had been trouble with handoffs, to eliminate those difficulties; and that has been an ongoing process.  We have also implemented some further steps with the plans for more timely transfers of data and more effective monitoring of the charge information in the pharmacy computer system, the so‑called "for our arts data." 

As a result, we have seen a vast reduction in the rate of problems arising at the pharmacy counter, people being unable to fill their prescriptions easily. 

We did not stop there.  We also have in place a casework tracking system so if any beneficiary does have trouble, we have a well‑established business process between us and the plans, to resolve it quickly.  We have been seeing a declining number over time, from month to month, of the cases where we need to intervene and provide this help, but it is there.  So, any beneficiary that is having difficulty can follow up with us to work to get that resolved as quickly as possible. 

Mr. RAMSTAD.  So, it is fair to say, in summary, that quality controls are in place? 

Dr. MCLELLAN.   Absolutely, and we have been tracking ‑‑

Mr. RAMSTAD.  When can the State of Minnesota, before my time runs out, expect to be reimbursed?  I am asked that question all the time at home.

Dr. MCLELLAN.   That is right.  Congressman Thompson asked that question as well.  We have set up a process with the States that follows the procedure that the States wanted to follow to minimize their burden.  There is a time frame in there.  We need to get data from Minnesota on the people who they want reimbursement for, and then summary information on those claims.  As long as Minnesota follows that schedule and that framework that we laid out, they will get reimbursement.  I expect that generally to occur by June if they provide us the data that they have agreed to provide us. 

Mr.Ramstad.  Thank you.

Chairman JOHNSON of CONNECTICUT.  Thank you. 

Mr. ENGLISH.  Thank you, Madam Chair.  Just to clarify something, Dr. McClellan, I think that you alluded to earlier.  Today, as we know, the GAO released a report regarding CMS operations outreach and communications with beneficiaries about their options under the new Medicare program.  We have referenced that earlier in this hearing.  We are told that GAO found many times beneficiaries were given incorrect answers to basic questions, but it seems many of the observations made by the GAO, as has been noted, dated to the early days of the program. 

First, how do you respond to the GAO findings directly, and is the information, in fact, yesterday's news?  What has the CMS done to correct the issues highlighted by the GAO? 

Dr. MCLELLAN.   Well, we have a number of concerns about the way the GAO report was presented, which I think makes it incomplete and inaccurate and out of date.  It is incomplete in the sense that it didn't look at most of the tools that we actually use and that our beneficiaries prefer for getting information about the drug coverage. 

For example, most of our beneficiaries give us their Medicare number when they call us or when they go on line, so that we can provide personalized assistance to them.  The GAO did not evaluate that part of our outreach and education program at all.  Even in the cases where they did look at our answers, they scored us as being inaccurate, when in fact they simply did not get information because they did not provide this beneficiary number. 

Now we have made clear that you can get information even without providing a beneficiary number.  When they actually looked at it, in the vast majority of cases they got the right answer.  So, incomplete evaluation.  Also, they asked questions like:  Can people compute with paper and pencil their out‑of‑pocket drug costs for the standard plan?  Well, we have tools that beneficiaries are using to compute their drug costs so they do not have to do it by hand.  It is much more complete information on predicting your cost for a year than has ever been available in any insurance program.  So, that was not evaluated.  So, incomplete and inaccurate as a result of not really looking at our whole tool status.  It is like taking a screwdriver and trying to use it to hammer in a nail, and not even using any of our power tools at all. 

The evaluations of actual beneficiary calls during February and March have shown satisfactory rates by beneficiaries around 86, 87 percent, and accuracy rates for these calls, the actual calls that beneficiaries make, of 93 percent. 

There are many other independent and third‑party evaluations that have gone on before, during, and after this time of our tools as well that come to similar conclusions, and those are all incorporated in our response to the GAO. 

Finally, as you said, it is out of date.  This looked at the circumstances in January.  We have made a lot of improvements in the program since then, including specific responses to the recommendations of the GAO.  Our goal is to make sure that our beneficiaries can get the help they need when they want to enroll in coverage, and that is reflected now in the hundreds of thousands of calls that we are answering every day, the tens of thousands of people that are enrolling in coverage every day, and the very high rates of satisfaction with that coverage and the savings that our beneficiaries are getting. 

Mr. ENGLISH.  Thank you for your comprehensive answer which has exhausted my time.  I yield back. 

Chairman JOHNSON of CONNECTICUT.  Mr. Emanual. 

Mr. EMANUEL.  Doctor, I know we talked earlier about some of the cost savings here.  If I am not mistaken, the original price of the prescription drug bill was $394 billion, and even with those savings it is way over $394 billion.  It is not even close as an evaluation.  I think the number I saw the other day in the report is that it will come in at $800 billion; and even, by standards in Chicago, that is twice as much as originally projected and originally told to Members on the floor. 

So, I compliment that there has been a, quote‑unquote, 20 percent savings over the trillion‑dollar figure, but it is still twice as much as the original 400 billion or $395 billion originally quoted on the floor and told to both Members, the public, and, most importantly, the taxpayers. 

It gets to the issue ‑‑ and we go around and around on this subject ‑‑ as a leader and somebody who is taking the leadership both in reimportation as well as the issue of direct negotiations, I know you know of the study done by the Center for Economic and policy research, a nonpartisan group.  You are familiar, I am sure, with the study.

Dr. MCLELLAN.   I do not think I looked at it recently, but I am sure I have seen it.

Mr. EMANUEL.  They say there is $40 billion worth of savings if you do what the VA does or Australia does, which is direct negotiations.  Rather than have this fight of direct negotiations versus private subsidized plans, I still do not understand this ideological, almost theological obsession about negotiation.  Why will we not have Medicare negotiate, private plans do theirs, and let the public choose which one they want? 

If it is all about choice, which has been the rhetoric that you always say ‑‑ and I appreciate that ‑‑ why would we prevent choice? 

Dr. MCLELLAN.   Beneficiaries do have a choice. 

Mr. EMANUEL.  No disrespect.  I do know something about spin.  I asked a specific question.  Why would we prevent choice between direct negotiations by Medicare and the negotiations that either United Health, WellPoint, or any of the other plans provide?  Why would we prevent the consumers, that is, the senior citizens, from having the choice, that basic market decision, because both choices ‑‑ that competition would drive prices down.  Why would we prevent the seniors from having choice, which was the selling point of this plan, which a number of us opposed? 

Dr. MCLELLAN.   I am all for seniors having choice.

Mr. EMANUEL.  Good.

Dr. MCLELLAN.    it has to be choices between specific real proposals, and I have not seen any specific real proposal along the lines that you have described that has been scored as saving money, that would operate in real neighborhood pharmacies, not the VA. 

Mr. EMANUEL.  Dr. McClellan, there has been from GAO to this study, we can submit:  Listen, if you want go to my Web site, I will give you another choice.  I list Costco in Chicago; Costco in Toronto; 500 miles apart.  Costco, bulk purchaser, negotiator.  The Costco in Toronto every month, and we update it for the same drugs, same milligrams, same doses.  The Costco in Toronto is always over $1,000 cheaper than the Costco in Chicago.  I will accept the theology of you and the philosophy of choice.  Bought in.  Done.  Sold.  Let's have a competition and choice between a Medicare negotiation price versus United Health, WellPoint, and any of the other 43 plans. 

I want choice.  Not a conscripted choice; a choice of direct negotiations or private market negotiations.  Let's have choices and then let the consumer choose. 

Dr. MCLELLAN.   I am not sure what the question is.  If it is about should Medicare rely on drug importation for all of its seniors, I am not sure the numbers work out.

Mr. EMANUEL.  That is not what I asked. 

Dr. MCLELLAN.   Are you asking for a VA option in Medicare? 

Mr. EMANUEL.  Sure.

Dr. MCLELLAN.   That comes with ‑‑ I would like to see the specific proposal, because that would come with a very narrow access to pharmacies, a 75 percent use of mail‑order prescriptions rather than community‑based prescriptions ‑‑ which, as you know in Chicago, is the way that most of your seniors get their drugs now ‑‑ and would come with a specific government‑determined formulary and specific government‑determined and government‑paid staff positions, government‑owned hospitals, a very strict network of care.  It works great for VA beneficiaries. 

I am not sure it is the model that Medicare beneficiaries in this country want.  They like choices of doctors.  They like choices of pharmacies.  I would like to see the specific proposal.

Mr. EMANUEL.  I spend time with seniors, since I have the oldest population of any of the 19 congressional districts in the country. 

Chairman JOHNSON of CONNECTICUT.  I am sorry, Mr. EMANUEL.  We do want to get through. 

Mr. HULSHOF. 

Mr. HULSHOF.  Thank you, Madam Chairman. 

Dr. McClellan, it has been suggested that perhaps you will do something about this May 15 deadline.  While you are at it, would you do something about this pesky April 15 tax deadline while you are at it? 

It was also referenced to you and your boss, Secretary Leavitt, when you and your other boss, the big boss, when you and the President came to Missouri recently ‑‑ I mean no disrespect ‑‑ the two of you were upstaged by the three Missourians on stage with you. 

It is a constructive critique but exactly ‑‑ the gentleman who is healthy, who did not take prescription drugs, who signed up anyway as you recall; or the woman, delightful woman who had 12 medications and she went on line and talked about the $200 a month she was saving with the choice; and even the old dairy farmer who said he knew his way around a dairy cow but not around a computer, and yet 1‑800‑Medicare gave him real savings. 

So, especially the steady success, even when our own colleagues and outside groups call public meetings just to bad‑mouth the program, I think the success we have had on behalf of America's seniors has been extraordinary. 

It was not that long ago we heard predictions, even within this room, even within this Committee, this will not work.  Now we hear well, okay, maybe it is working but wait until the doughnut kicks in.  We heard seniors will not have choices. 

Now the complaint is too many choices.  We heard we will have to legislate the premium because we could not guarantee a $35 monthly premium.  As you pointed out, now many seniors, 95 percent of which have access to premiums half that, should they choose to make it. 

Again, it is great to see the progress and the aggressive efforts you have had. 

Now, here is the question, to follow up on my colleague, Mr. Camp of Michigan.  There are a number of independent pharmacists in my district, and I have a meeting with several of them coming up, in fact, on Monday back home in Columbia, and they are concerned about the new landscape.  There is a suggestion out there ‑‑ in fact the next panel will suggest that there needs to be some legislation, a prompt‑pay legislation that would direct plans to pay electronically submitted claims within 14 days; other claims within 30 days.  That is one proposal, one suggestion.  I know there is another one about a set dispensing fee. 

Let me yield to you, then.  Are these good suggestions, why or why not? 

Dr. MCLELLAN.   First, let me again express the tremendous gratitude that we have to the work that pharmacists all over the country have done, especially in those early weeks of the program when we were implementing a new benefit for more than 20 million people on the same day.  They did a tremendous amount of work to help people get the drugs they need, and since that time have been giving us a steady stream of constructive ideas about how to make the program work better.  Those ideas have translated into some steps that are reducing costs for pharmacies and helping them improve quality of care as well.  I will talk about those in a second. 

With respect to specific legislation, I would like to obviously talk to you more about any ideas.  I am concerned about proposals that would get us directly involved in negotiating contracts or setting prices.  Those tend not to keep up with modern medicine and may not lead to the most effective ways of dealing with care.

I would be particularly concerned about steps that might actually increase costs of drugs for beneficiaries and for the overall program.  With that in mind, I think there are a lot of steps that we can and are taking together with the Nation's pharmacists to reduce their costs and improve quality of care. 

Let me give you a couple of examples.  With the National Community Pharmacists Association (NCPA) we have worked with the health plans to come up with a standard set of codes that are going to be used for most of the transactions that up until now have required pharmacists to look things up in a book or make a call to a health plan. 

By having standard consistent coding in the pharmacy computers for things like prior authorizations or off‑formulary drugs, we can reduce their administrative costs significantly and make their job easier.  That means more time for serving the beneficiaries that they really care about. 

Second, we started a new collaboration called the Pharmacy Quality Alliance, partially led by the NCPA, but again working with health plans and consumer groups and really all of the health care stakeholders to do a better job of identifying and then supporting high‑quality pharmacy care. 

I am a physician.  I have seen this in my own practice.  You get squeezed with payment rates coming down, and it just gets harder and harder to make that up on the volume.  So, what we want to do is support a business model I think many pharmacists want to pursue, where they get paid more when they take steps to help beneficiaries lower their drug costs and help them get better quality of care.  There are so many ways pharmacists can do that:  by helping to educate people about generics, by helping them with problems of medication interactions, by improving medication compliance. 

Many patients don't comply with the prescription they get.  That is the next challenge we will meet.  We will do it with help from the pharmacists.  So, there are a lot of steps we can take together to improve pharmacy business, improve quality, and reduce costs that I think might be worth pursuing in the short term. 

Chairman JOHNSON of CONNECTICUT.  Dr. McClellan, if we could go to the two members who are not ‑‑

Dr. MCLELLAN.   Absolutely, I would be happy to stay for those. 

Chairman JOHNSON of CONNECTICUT.  Mr. Herger of California. 

Mr. HERGER.  Thank you.  Dr. McClellan, in your statement you write:  For the 10‑year period of 2006 to 2015 the net total costs of the drug benefit to Medicare is now estimated to be about $130 billion less.  In addition, the State phased‑down contributions are now projected to be $37 billion less.  Not only have there been reductions in the cost of prescription drugs, market forces have allowed for more attractive alternatives for beneficiaries.  In fact, CMS research has found that the majority of new enrollees have chosen plans offering a plan design other than the standard drug benefit. 

Doctor, does CMS have plans to improve the display of comparable plan information, to make it easy as possible for Medicare beneficiaries to review plan options and make an apples‑to‑apples comparison? 

Dr. MCLELLAN.   Congressman, we are taking steps to do that now that we have got a clearer idea of what beneficiaries value.  As you said, it is not the standard benefit.  If we had tried to come up and guess what benefit package they wanted I think we might not have gotten it right.  Now that we are seeing what they actually want, we are setting up comparison systems that focus on the key dimensions that matter to beneficiaries. 

What we are seeing that matters is the premium, the overall out‑of‑pocket costs for the drugs that can be expected; but also some important benefit features like whether or not there is a deductible, whether or not there is a co‑insurance, meaning the beneficiary pays a percentage of the drugs, or a flat copayment, a flat rate; whether or not there is coverage in the so‑called coverage gap. 

Those dimensions seem to be very important to our beneficiaries and we are improving our side‑by‑side display of plans to help beneficiaries focus in the key dimensions that they are telling us are important to them in their own choices. 

Mr. HERGER.  Dr. McClellan, I want to thank you for the job you have done, looking at the magnitude of what you have done, the job to roll out this entirely new program. 

I had a visit in one of my town hall meetings a few weeks ago with a pharmacist in one of my small communities of Weaverville, California, and to hear him say how good the program was working, how happy those that signed up were when they were coming in.  As a matter of fact, he said because the costs were lower, they were actually purchasing more drugs.  That was because they needed more and they could not afford it before. 

So, again, I think you are doing a great job.  We certainly have a ways yet to go, but considering the challenge, I want to commend you.  Thank you, Madam Chairman. 

Chairman JOHNSON of CONNECTICUT.  Thank you.  Mr.Becerra. 

Mr. BECERRA.  Thank you, Madam Chair.  Especially thank you for letting those of us who are not on the Subcommittee to ask questions. 

Dr. McClellan, thank you very much for extending your stay here.  We appreciate that very much.  We hope you continue to work for that eventual goal of getting as many people enrolled as possible. 

A quick question to you, and I am going to try to keep, Madam Chair, my questions under the 5 minutes.  So, please feel free to gavel me as soon as that red lights comes on, if it does. 

The call centers.  We know there are some issues with the call centers.  The volume in some cases has increased and, obviously, for the next 2 weeks we expect it to be much higher than it has been in the past.  I know you had a contractor go out there to monitor some of these call centers from some of these plans to find out what is going on.  Some are not doing as good of a job as others. 

Would it not be helpful for beneficiaries to have access to the information that this contractor found out about the call centers ‑‑ who is doing well, who is not doing well ‑‑ so that these beneficiaries can make an informed decision on which plan will suit them best? 

Some plans have heeded your call to try to be more aggressive in handling the work that is coming through from those who are inquiring about their plans.  Others are not.  I would think that we would want to let the American public, the taxpayers, know which plans are really trying to do a good job of marketing themselves to those they will give money, or from whom they will get money to offer the plan. 

So, you have this contractor who did this examination of the call centers from the various health plans.  Why not make it available before the May 15 deadline so people can see which plans are really trying to do the work of attracting their business? 

Dr. MCLELLAN.   We are doing all we can to monitor the plan performance and so we have got a contractor that is now checking on the wait times.  That full process has been in place just for a few weeks, and we do not yet have reliable data at the plan level. 

What I can tell you is that we do want to make that available as soon as possible, when we have reliable estimates.  What I can also tell you is some good news in terms of wait times.  The vast majority of plans are answering the vast majority of calls in under 5 minutes.  As we get more precise information, we will make it available. 

Mr. BECERRA.  Can I ask you what more you will be doing to try to make sure that folks who are not as proficient in English or are suffering from a particular disability, hearing disability, speech impediment, those who are going to have a little bit more difficulty trying in these last hairy weeks to make sure they do the right thing, that they are given access to people that can help answer the questions they will have on making a decision on which plan to enroll. 

Dr. MCLELLAN.   That is very important to me because that describes a lot of our beneficiaries.  We have not only ramped up our whole customer support staff.  We have got more than 6,000 representatives.  It is all hands on deck between now and May 15.  We have also made sure that all of our help lines, all of our major Web pages, are available in English and Spanish.  We have increased our partnerships with groups that specialize in other languages, more than 16.

Mr. BECERRA.  The difficulty I have with what you just said is that we know that the vast majority of seniors, period, have not signed up to your Web page.

Dr. MCLELLAN.   Call lines, too. 

Mr. BECERRA.   you have a lot of folks who do not sign on to the Web page.  Those who are limited English‑proficient are less likely to sign on to the Web page as well, and have difficulties with your call center. 

So, I hope what you will do is you will ramp up the services for those who are really trying to make informed decisions, but are not gaining access to people who can give them the information they need.

Dr. MCLELLAN.   That is why we are partnering with groups like the National Alliance for Hispanic Health.  They are helping us with community‑based events.  We are doing faith‑based events, I think, in your district.  I want to thank you for the help with supporting many of those.  It is that local grassroots outreach that is really making a difference with many of these hard‑to‑reach populations, and we are accelerating all of that between now and May 15.

Mr. BECERRA.  Hopefully, May 15 can be moved back a bit.  I know a number of us are very concerned.  We appreciate that you at least came here to tell us a little bit about what is going on. 

Thank you, Madam Chair.  I yield back.

Chairman JOHNSON of CONNECTICUT  As we close, want to take one last look at the chart that I talked about at the beginning.  The tallest silo on the left shows that the earned income tax credit for the elderly, first passed in 1975, still reaches out to only 68 percent of the eligible seniors.  Medicaid for the elderly only encompasses and touches 60 percent of the eligible seniors.  Supplemental security income reaches only 53 percent.  Food Stamp reaches only 30 percent. 

So, truly, Dr. McClellan, it is outstanding that you are moving now beyond the 70 percent and the 80 percent and looking at the possibility before the May 15 deadline and certainly through the low‑income people that will register thereafter, you are looking at 90 percent of the 42 million seniors either in the Medicare program or in a position where they did not need it and therefore didn't sign up. 

 to have only 4 million left, I expect you will have by May 15, and with May 15 and the follow‑on work of both agencies with the low‑income seniors that have special eligibility, it is really a powerful performance that you and all the good workers at CMS and the SSA and your partners throughout the State and local governments and all of your many partners in the nonprofit sector have turned in. 

The seniors have got it.  They are signing up because they save money.  They get protection from poor drug interactions.  They get protection against catastrophic drug costs, equally important, they get to tailor the program to themselves. 

I think it has been broadly missed that whether you go to the doctor or whether you do not, you pay $88 a month for Part D.  This plan, if you do not use drugs in my district, you can get the $7.35 variety.  In California, I understand they have a $5.25 variety.  I think in some other States they even have a lower cost variety than that. 

If you use a lot of drugs, u can get the higher confident premium and being covered during the doughnut hole, so to speak. 

So, what is nice about this program is that it is not one‑size‑fits‑all, d government could not provide that kind of choice to our seniors.  Indeed, as they live longer, as they live healthier lives, having that kind of choice is extremely important.  You, having that delivery system that you have built, is the only hope that Medicare can begin to focus on helping seniors use our health benefits, our preventive benefits, and lead healthier lives and be financially more secure, therefore. 

So, thank you both very much for the hard work of you and all those behind you, and for your testimony here today.  Thank you. 

The Subcommittee will recess for about 10 minutes while we go over and vote.  Maybe even less. 

We are going to take the panel right away after the first vote, and we will be here, then, during the debate on the motion to recommit and part of the next vote.  Then we will have to hear the rest of the panel when we come back.  We will be back as soon as we can, probably 8 to 10 minutes, and proceed with Panel II.

Thank you very much Dr. McClellan and Ms. DISMAN.

[Recess.]

Chairman JOHNSON of CONNECTICUT.  The second panel will gather.  We will reconvene.  Ms. Everett, would you please proceed.  Susan Everett of Medicare Today. 

Thanks to my colleagues for getting back.  We have about 15 minutes, 20 minutes.

STATEMENT OF SUSAN EVERETT, NORTH CAROLINA REGIONAL COORDINATOR, MEDICARE TODAY, RALEIGH, NORTH CAROLINA

Ms. EVERETT.  Okay, I will talk fast. 

Chairman Johnson and members of the Subcommittee, thank you for the invitation to join you today and for the opportunity to testify regarding the implementation of the Medicare Part D prescription drug benefit. 

My name is Susan Everett, and I am representing Medicare Today, a partnership of over 400 national and local organizations that have spent the last several months providing information to literally millions of Medicare beneficiaries. 

I am a regional coordinator for Medicare Today and have been personally involved in numerous education and enrollment events in Virginia ‑‑ Virginia, Kentucky, North Carolina, Tennessee, Maryland and West Virginia. 

Let me begin by telling you a story about a woman I met at one of our events.  Her name is Doris, and she is from Newport News, Virginia.  Doris originally wanted nothing to do with the Medicare Part D benefit.  She had heard so much negative commentary about it from critics who were quoted by the media saying it was too complicated and wouldn't save anyone any money.  She was so discouraged by what she heard that she decided it wasn't for her. 

 then Doris ran into some health complications that required a new prescription costing more than she could afford on her fixed income.  Her sister convinced her that she should at least come to the Medicare Today event that we were doing in her community to learn a little about the program firsthand. 

Well, once Doris got there, we not only ran her information through the CMS plan finder and found a plan that would save her money, but we also connected her with the SSA official on site and got her enrolled for low‑income assistance.  Today Doris doesn't have to wonder whether she can afford her medicine or not. 

Doris' story goes to the heart of my testimony today.  The Part D implementation process has, by and large, worked.  It hasn't been perfect, but I don't see how any program of this magnitude could be perfect in its first year of operation.   because the Centers for Medicare and Medicaid Services created tools for beneficiaries to use to find the best plans for their circumstances, and because so many organizations like ours are on the ground, interacting every single day with beneficiaries, the implementation process has been a positive one. 

In 2005 and thus far in 2006, Medicare Today has conducted over 2,500 beneficiary events.  We have provided information to over 5.5 million beneficiaries and helped enroll over half a million, not counting those who enrolled on their own after attending one of our events.  We have trained 175,000 people in all 50 States so that they are qualified to help Medicare beneficiaries enroll in the Part D program. 

I could fill the rest of this evening with anecdotes about people who have been helped through this effort, but I want to give you some empirical evidence as well regarding the effectiveness of the implementation effort. 

The Medicare Today partnership commissioned an American viewpoint survey of 1,000 seniors in April, asked whether enrolling was easy or difficult.  Seventy‑two percent said they found it very or relatively easy, to just 20 percent who said it was very or relatively difficult. 

We also asked those who were self‑enrolled if they encountered any problems in enrolling; 89 percent said they had no problems.  I think these are very solid results for a major program in its first year of existence. 

We have learned a great deal over the past few months.  We have learned that advertising and mass messaging is important, but is not a substitute for meeting people and answering their questions face to face.  We have learned that to reach low‑income seniors and to get them the assistance they need, you have to work through established systems such as Meals‑on‑Wheels programs and subsidized housing facilities. 

We have also seen the value of public‑private partnerships, having worked very successfully with SHIP programs and Area Agencies on Aging.  A good example of this collaborate effort is seen in the work of one of our partners, Ascension Health, and its many hospitals and health services throughout the country. 

In Bridgeport, Connecticut, to name one instance, the parish nurses of Ascension St. Vincent Health Services worked with the State to have computer‑equipped vans at churches to educate and enroll parishioners.  This type of effort has been very successful and well received. 

I want to thank the members of this Subcommittee and this Congress for creating this drug benefit for my new friend Doris in Virginia and the millions more like her whose lives are made better by it. 

I hope I have given you a useful on‑the‑ground perspective on what I believe has been a very successful enrollment process.  It is my hope and belief that the lessons we have learned will make the next open enrollment period even more productive and problem‑free. 

Thank you, and I will be pleased to answer your questions. 

Chairman JOHNSON of CONNECTICUT.  Thank you very much.

[The prepared statement of Ms. Everett follows:]

Chairman JOHNSON of CONNECTICUT.  Dr. Schiesser.

STATEMENT OF HEATH SCHIESSER, PRESIDENT, PRESCRIPTION DRUG PLAN, WELLCARE HEALTH PLANS, INC., TAMPA, FLORIDA

Mr. SCHIESSER.  I am not a physician, but I am flattered. 

Good afternoon.  I am Heath Schiesser, president of Prescription Drug Plans for WellCare Health Plans.  I appreciate this opportunity to testify about the implementation of the Medicare Part D program. 

WellCare has been privileged to serve Medicare beneficiaries for more than 10 years.  According to the most recent data from CMS, approximately 850,000 Medicare beneficiaries are enrolled in prescription drug plans offered by our company in all 50 States.  Another 70,000 beneficiaries received prescription drug coverage through our Medicare Advantage health plans.  WellCare is strongly committed on a long‑term basis to meeting the health care needs of Medicare beneficiaries. 

We applaud Congress for enacting the Medicare Modernization Act of 2003.  We thank CMS for its tremendous work in achieving a largely successful implementation of the Part D program. 

My testimony today will focus on three areas:  First, examples of the savings and the value of the Part D program is delivering to beneficiaries; second, steps we are taking to communicate with beneficiaries and further strengthen the program; third, the importance of providing options to beneficiaries. 

WellCare is giving beneficiaries the option of choosing prescription drug coverage that goes well beyond the minimum requirements established by the MMA.  We are offering three PDP alternatives across the Nation, all of which offer a $0 generic drug copay with no deductible and low premiums. 

We also offer Medicare Advantage plans that offer Medicare Part D coverage, along with lower physician and hospital copays, for no monthly plan premium, including no Part D premium, in 50 counties across 6 States. 

To more clearly illustrate the value the Part D program is delivering to Medicare beneficiaries, I would like to review the experiences of two seniors who are enrolled in a WellCare prescription drug plan.  Mike is a Medicare beneficiary in California, who will probably save about $2,400 this year as a member of a WellCare plan.  He is taking six prescriptions that would cost about $520 per month retail.  By comparison, with our discounts and the coverage provided by Part D, he will save about 38 percent this year. 

Ann is a Medicare beneficiary in New Hampshire, who will probably save about $700 this year and avoid the coverage gap as a member of our Signature plan.  She is taking two drugs whose combined cost ordinarily would cause her to reach the coverage gap in about November.  However, by switching to generic alternatives, Ann's monthly drug care cost will probably drop to about $70 per month, which will allow her to avoid courage gap entirely.  Even better, since the WellCare Signature plan is zero dollars for generic copays, her monthly copays for those drugs will be zero.  As a result, Ann's monthly premium of about $24 for her Part D plan will probably be her only expense on prescription drugs for the entire year. 

As for how we are working to strengthen the program, I would like to briefly highlight three key areas.  First, in January, Part D programs across the Nation experience extremely high call volumes, largely because of problems of eligibility data and operational difficulties in pharmacies.  WellCare moved quickly to adopt corrective measures, dramatically increasing our staff, working overtime, and refining our process. 

Between January and April, we increased our staffing by approximately 75 percent.  Today WellCare is consistently delivering service in excess of CMS requirements.  Our average time to answer has been under 20 seconds over the last 2 months. 

Also, we adopted transition plans in January, which CMS subsequently required all plans to extend to March 31.  As we approach the end of this transition period, we took a number of steps to ensure a smooth shift into the normal application of our formulary, which have proven to be successful. 

Finally, at the industry level, WellCare and other plan sponsors have been working through our national trade association, AHIP, to address implementation issues in collaboration with the leading pharmacy and physician groups. 

These are just a few examples of the strong measures that WellCare and our industry as a whole are taking to help strengthen the Part D program and assure its long‑term success. 

I also want to briefly note our concerns with proposals that would standardize benefit packages under the Part D program.  We believe this is a bad idea for several reasons.  First, millions of beneficiaries would be forced to leave the benefits they have chosen and enter into a standardized plan that may not be the best option for their specific needs. 

Second, the standardization approach underestimates the abilities of beneficiaries to make thoughtful, informed choices. 

Finally, we think that instead of focusing on limiting choices, we need to be focusing on providing beneficiaries with better information. 

Third, the standardization proposals overestimate the ability of the experts to design benefits that will meet the beneficiaries' needs. 

In closing, I hope you will agree that the Part D program is providing significant value to beneficiaries, that WellCare and other sponsors are working hard to ensure the success of the program, and that beneficiaries are well served by a program that gives them a wide range of choices. 

Thank you for the opportunity to testify.  I look forward to answering any of your questions. 

Chairman JOHNSON of CONNECTICUT.  Thank you very much.

[The prepared statement of Mr. Schiesser follows:]

Chairman JOHNSON of CONNECTICUT.  Mr. Hays.

STATEMENT OF ROBERT M. HAYES, PRESIDENT, MEDICARE RIGHTS CENTER--

Mr. HAYS.  Good afternoon, Madam Chairman, Mr. Stark, Mr. Doggett.  We do very much appreciate the opportunity to share with you our experiences and our clients' experiences during the first 4 months of the Medicare Part D implementation. 

As you may know from national and State hotlines, casework, education programs, we provide direct assistance to people with Medicare.  Each year the Medicare Rights Center receives over 80,000 calls for assistance.  In recent months we have particularly concentrated our services on enrolling people with Medicare in low‑income programs, especially Extra Help. 

We have also launched a Part D appeals program.  We have recruited a battery of lawyers, volunteer lawyers and physicians, to assist people with Medicare, obtain the medications that plans have denied them. 

The Medicare Rights Center is a nonprofit, independent organization relying on a small staff with hundreds of deeply committed volunteers.  We are not supported by the pharmaceutical industry, the insurance industry, or any other special interest group.  We have no political or commercial interest that interferes with our effort to propose public policies to serve people with Medicare. 

That being said, Madam Chairman, at the Medicare Rights Center we are experiencing Part D to be badly designed, a scandalously wasteful program that provides far too little drug assistance, health security and peace of mind to people with Medicare. 

Now, this does not mean that people with genuine need cannot and do not get meaningful assistance.  We work to bring that help to people every day.  We do not dispute the polls that say up to two out of three people enrolled in a plan are actually saving some money, but in a $1.3 trillion program, we ask about the millions of people in need who are not seeing savings. 

Our clients continue to report problems.  Many find that their drugs are not covered by their plan, that they cannot afford their copayments, that they lost better coverage. 

I will just mention very quickly some of the aid‑specific correctives we are recommending in our written testimony. 

Number one, first and foremost, Madam Chairman, we should automatically enroll eligible people in the low‑income subsidy.  There is widespread ‑‑ there has been widespread bipartisan agreement that the number one priority of a Medicare drug benefit is to assist the poorest Americans, secure the medicines that doctors prescribe. 

Our key work over the past 6 months has been to enroll as many people as we could in Extra Help.  We have enlisted hundreds of volunteers to reach out.  We advertise a toll‑free phone number, run public service announcements, work cooperatively with drug plans.  We work with pharmaceutical companies that supply us with contact information for poor people who have been disqualified from pharmaceutical assistance programs because of Part D.  Ironically these people are good candidates for Extra Help. 

Still the results are dismal.  It takes 33 calls to identify a likely candidate for Extra Help; 80 percent of eligible people, Madam Chairman, have not yet been enrolled.  These are the folks who need our help the most.  We all admire the tenacity of Sisyphus futilely pushing his boulder up the hill, but that should not be our model in a public program aimed at protecting the lives of millions of Americans. 

Federal financial data on income and income‑generating assets can be used to automatically enroll men and women eligible for Extra Help.  Automatic enrollment with opt out works very well in Medicare Part D, which has a 96 percent enrollment rate.  It can work for part D's Extra Help as well. 

Another recommendation, let us require meaningful Part D plan comparisons.  Reasonable public policy should not require people with Medicare to shoot in the dark to pick a plan that will work for them.  Thoughtful choices is not what has been going on over the past 3 or 4 months.  Many callers now to a hotline, who are enrolled in plans, never understood that a covered drug could come with $100 per prescription copayment.  They never thought a covered drug would come with requirements that they try other medications first, or that their doctor would have to agree to become a witness in a legal appeal so they could get their covered drug. 

Almost no one now hitting the gap in coverage, this infamous doughnut hole, was told about this by the plans.  How many brokers, people earning commissions for each enrollment, each person they sign up, how many brokers do you think told their customers about the doughnut hole?  Congress should force a more finite number of plans into meaningful comparisons to allow customers, however imperfectly, to make a less risky selection. 

Look, even with these reforms, there still will be too much waste, not enough help to provide a benefit as good as we can afford with finite dollars.  The lessons of Part D cry out for enactment of a drug benefit administered directly by Medicare.  Let the plans compete with a Medicare drug benefit, increase choice, and look to keep administrative costs low and profiteering nonexistent.  Honest supporters of a market approach should not fear competition, not even for Medicare. 

Thank you. 

[The prepared statement of Mr. Hayes follows:]

Chairman JOHNSON of CONNECTICUT.  Mr. Wolfe, do you think you could make it in 4 minutes, and we can take you.  We still have to come back, and we will come back for questions. 

Yes, why don't we come back.  We will take the last two testimonies.  This is a vote, two 5‑minute votes, so it will be about 20 minutes.  We will be back as soon as possible.  Sorry about this. 

[Recess.]

Chairman JOHNSON of CONNECTICUT.  The hearing will resume. 

Mr. Wolfe, would you begin.

STATEMENT OF BILL WOLFE, VICE PRESIDENT, MANAGED CARE, RITE AID CORPORATION, HARRISBURG, PENNSYLVANIA

Mr. WOLFE.  Good afternoon, Madam Chairman, Congressman Lewis and Congressman Camp.  I am Bill Wolfe, president of Managed Care at Rite Aid Corporation, which is based in Camp Hill, Pennsylvania.  I am pleased to be here today. 

Rite aid is one of the Nation's leading drugstore chains and is currently operating 3,300 stores in 27 States and the District of Columbia, with total sales of $17.3 billion. 

Rite Aid and the chain drug industry recognize that the implementation of Medicare Part D was a monumental task.  Community pharmacists were clearly front and center once again, demonstrating their unique and very important position in the health care continuum as one of the most accessible and most trusted health care providers. 

Given the scope of the program and some of the initial technological and data integrity failures, it is remarkable, in my opinion, how quickly the program stabilized.  This would not have happened without the unprecedented cooperation of all stakeholders. 

We appreciate the time that senior staff at CMS, as well as congressional staff and Members of Congress, spent recently visiting pharmacies, learning more about tremendous efforts made by community pharmacists to make this program work. 

Rite Aid spent countless hours and made significant financial investment in systems and staff, preparing for Medicare Part D.  We had an intense focus on educating and training our pharmacists.  Our pharmacists and field management teams conducted thousands of beneficiary outreach and educational sessions in their communities.  Through our health plan partnerships, tens of thousands of beneficiary educational sessions were conducted in our stores, and we included messaging in our weekly ad circulars. 

Through our preparation, pharmacists throughout the country were able to anticipate some of the implementation issues.  While they struggled in the first few weeks of Part D, they always gave every effort to take care of their patients. 

There are ongoing issues which we think can be corrected.  First we will speak to the enrollment lag.  If a beneficiary applies for the Part D benefit in the last few days of the month, an enrollment lag is created, and pharmacists don't have the necessary data necessary to fill a prescription.  The best solution would be an enrollment deadline established each month so there is sufficient time to process applications and enter billing in the system. 

We need to have standardized plan electronic messaging to pharmacies.  Health plan messaging needs to be clear and provide actual information so pharmacists can promptly address a patient's needs.  The National Association of Chain Drugstores, NCPA and AHIP have joined with CMS to help address this problem. 

Formulary issues have begun to be addressed.  Many beneficiaries are concerned that a plan could remove the drugs they are taking now from the Part D plan's formulary in the future.  That is why we think that CMS's recent decision to allow a beneficiary to continue taking a formulary medication, even if the plan changes the formulary, is good for quality health care and will reduce administrative burdens. 

I am concerned about the coverage gap.  The concern is that Medicare beneficiaries do not fully understand the issues relating to the so‑called doughnut hole and how it will affect their coverage.  We believe that public‑private sector collaboration to develop assistance programs for beneficiaries is imperative. 

Community pharmacies are held to charging the beneficiary no more than their discounted contract rate and therefore contributes directly to assisting beneficiaries in the coverage gap.   many beneficiaries will undoubtedly need additional assistance to assure their access to needed medications. 

We must also improve and reward quality.  Improving quality under Part D by providing medication therapy management is important to everyone.  Rite Aid has partnered with the University of Pittsburgh School of Pharmacy to offer medication therapy management services by especially trained Rite Aid pharmacists. 

We welcome the formation of the Pharmacy Quality Alliance, which CMS has indicated could lead to new pharmacy payment models based on optimizing the patient outcomes.  Rite Aid supports efforts on controlling costs by paying for better care and improved outcomes, not by reducing payment rates to providers. 

While Medicaid is not in the Committee's jurisdiction, I feel compelled to raise concerns about changes to the Medicaid program as part of the Deficit Reduction Act, which will substantially impact community pharmacies' ability to serve Medicare as well as Medicaid patients. 

The DRA reduces payments to pharmacies for generic medications under Medicaid by about $6.3 billion over the next 4 years.  We believe that the reduction in payment will take away much of the incentive for pharmacists to dispense generic medications.  This is baffling, given that most States spend less than 25 percent of their Medicaid pharmacy fund on generics, even though generics are more than 50 percent of the prescription volume. 

Public and private payers should be doing everything they can to increase, not decrease, the dispensing of generic drugs.  Generic drug utilization is one of the most cost‑effective ways to control prescription drug costs. 

Reductions of this magnitude in Medicaid, coupled with the current economic impact of the Medicare Part D program, will unquestionably reduce access to pharmacies.  Retail pharmacy is an extremely competitive, low‑margin industry operating on an average profit margin of 2 percent.  We hope that you will support the delay or revision of these Medicaid pharmacy payment changes as the industry adjusts to the operational and economic challenges of Medicare Part D.

Thank you very much for this opportunity to share Rite Aid's perspective.  We will look forward to continuing to work with Congress and the Administration on these issue.  I will be happy to answer any of your questions at the conclusion. 

Chairman JOHNSON of CONNECTICUT. Thank you very much.

[The prepared statement of Mr. Wolfe follows:]

Chairman JOHNSON of CONNECTICUT.  Ms. Grisnik.

STATEMENT OF PAM GRISNIK, OWNER, RX EXPRESS, GROVE CITY, PENNSYLVANIA

Ms. GRISNIK.  Good evening, Madam Chair and other members of the Subcommittee on Health.  Thank you for conducting this hearing and providing me the opportunity to share the experiences with the new Medicare Part D program on behalf of the NCPA.   The NCPA represents more than 24,000 community pharmacies, 55,000 community pharmacists, 250,000 employees and millions of patients who rely on us for their prescription care.  The Nation's independent pharmacies dispense nearly half of the Nation's retail prescriptions. 

Independent pharmacists provide vital prescription services in both rural and urban areas, where many patients could not receive their prescription drugs were it not for their neighborhood pharmacy and the relationships they have developed with their local pharmacist.

My name is Pamela Grisnik, and I am from Grove City, Pennsylvania.  Sitting behind me is my husband Paul.  We have both been pharmacists for 24 years, the last 16 which we have owned the RX Express Pharmacy in Grove City.  We were also members of the NCPA, the International Academy of Compounding Pharmacists, and the Pennsylvania Pharmacists Association, of which my husband Paul is on the executive council.  We currently employ 16 full‑time staff people who provide personalized care for approximately 12,000 patients in our community.  We were also sponsors for five pharmacy interns from three different schools of pharmacy in western Pennsylvania. 

We have built our practice in the face of numerous competitors by focusing on patient care.  Our patients' health is our main concern. 

The change I have seen in my practice since the start of Medicare Part D can be summarized as follows.  First, Part D reimbursements are too low and too slow. 

Secondly, unfortunately, the confusion around Part D continues.  The State previously reimbursed my pharmacy on a weekly basis for prescriptions I filled for dual‑eligibles.  We are currently waiting a minimum of 4 to 5 weeks for reimbursement on these same prescriptions.  Reimbursements are simply too slow. 

This past weekend I caught a drug interaction for a Part D patient.  After 45 minutes of my time, consulting with a doctor and the patient, I finally was able to correctly fill the prescription for this patient.  I was unable to submit the claim for the payment as the plan's computer system was down.  Once the claim finally was submitted, I discovered my total reimbursement was $2, period, $2.  That is it.  Not even a hamburger, $2; $2 to cover the medicine, the bottle, the label, my technician, the rent, the utilities, not to mention the pharmacist's time and the counseling.  This reimbursement is simply too low. 

Thirty‑six percent of independent pharmacy owners are afraid that low and slow reimbursements will put them out of business; 29 percent have asked their wholesaler for assistance; 29 percent have taken out a line of credit.  Cash flow is worse for 93 percent of independents who are waiting on an average of 70,000 in reimbursements from each Part D plan.  Low and slow reimbursements are a very, very real problem. 

Secondly, the confusion of Medicare Part D does continue.  Many patients are already hitting the doughnut hole.  They do not understand the doughnut hole.  Many pick up their prescriptions.  They leave.  This has happened many times the past couple of weeks.  They come back.  They throw their bag at me and say, you made a big mistake.  I paid $20; this is $160 or $100.  You have made a huge mistake, Pam.  You better check your records. 

I try to explain the doughnut hole to them.  They look a little confused.  Somehow they maybe remember.  I usually call the plan so they can actually hear from the representative from their plan the bad news from the plan directly that this is the doughnut hole, how much they have spent, how much more they need to spend to get out of it.  None of them really did expect this yet, and few can afford the higher costs.  The sudden changes have confused the seniors, and the confusion continues. 

Those who have not signed up are nervously eyeing the May 15 deadline.  Many have tried to navigate their array of choices and have really, truly been discouraged by the complexity of the benefit.  They do come into the pharmacy.  They do throw stacks of paper at me and say, please, Pam, Paul, will you please help me go through this?  Will you help me sign up?  They have been to seminars.  They have been to many seminars.  Some of them are still very, very confused. 

We are in a college town.  One of our patients is a retired college professor.  She came in to me with her Part D papers and said, I have a doctorate.  I thought I was intelligent.  Obviously I am not. 

The Medicare Part D benefit card should not be an advertising space, yet some Part D benefit cards have the featured logos of national chain pharmacies and retailers.  Many of my patients do not realize that they can still continue to come to my pharmacy.  They look at the card that has the advertisement.  They go to that pharmacy. 

Some patients have returned to my pharmacy, but the confusion does continue.  Sometimes when they call the third party, the Medicare program.  They don't tell them that I am part of the plan even though I am.

Many of the community pharmacies' concerns concerning Part D are addressed by the Jones‑Berry bill, H.R. 5182.  This bill does clarify the rules on cobranding, requires prompt payment for properly submitted claims, and establishes a minimum reimbursement on generic drugs.  Chairman Cochran has also introduced a similar bill in the Senate.  These commonsense improvements will ensure that Medicare Part D will deliver its full promise for our seniors. 

Some 15 years ago I myself was diagnosed with leukemia and told I had a month to live.  From that experience and from my professional work, I do understand the importance of having access to quality prescription care. 

My fellow community pharmacists and I are looking forward to working together with you to solve these current issues and would like to ask for your help so that we can continue to provide quality prescription care to our patients. 

Thank you for inviting me to speak on this important issue.  I will be happy to answer any questions you may have.

[The prepared statement of Ms. Grisnik follows:]

Chairman JOHNSON of CONNECTICUT.  Thank you all for your testimony.  I appreciate it very much. 

Ms. Grisnik, I would be happy to work with you on some of the problems that you raise.  In my part of the country, most of, or at least in many instances, the problems that you point to have been worked out.  I am interested that you still are ‑‑ for instance, we can looked into the payment process before this hearing. 

The news that we are getting is it is back down to 2 weeks, but 2 weeks is what these plans have always been using.  It is what is in their contracts.  It is unlikely it will come in lower.  Now, if you get somebody who comes in on day 14, it may be 2 weeks plus a day.

Ms. GRISNIK.  As I left, I checked.  It was still about four.  Maybe it will shorten up in our system.  It was still around four. 

Chairman JOHNSON of CONNECTICUT. We will talk to the Administration about that, because that is unbearable. 

As to the doughnut hole, in States that have programs like Connecticut or Pennsylvania, there are about six States that have subsidy programs that rise about the 150 percent of poverty income, and Connecticut goes to 235.  All of those payments count toward the doughnut hole. 

So, those people are not exposed.  We are saving the State so much money that they can easily start a program that pushes that 150 percent of poverty income up.   for a Federal program, pairing with the States, that is actually higher than many of the programs that we do with States.  So, it was a good place to start, and the logic was we are going to be saving the States so much money not just on their Medicaid patients, but also on their own State employees, that they can plow some of that money back into a program that provides some help for those who need it. 

Then, of course, the bill also allows families to help with that doughnut hole.  There will be developing community organizations that will help. 

 it is important to have those who can afford it to pay their freight, because if they do, their kids don't have to.  When you look at the salaries that are currently being paid, never did any of us think we would live in a world in which there are really obscene salaries being paid.  You certainly, when those people retire, want them to pay, make their personal effort. 

So, structuring a plan for the years ahead, you have to take into account the seniors that are sitting there that could be paying if they needed to.  There are 3,500.  I will be one of them.  I think we do have to structure a plan so that those who can carry 3,500 after the ordinary amount, because the threshold covers two‑thirds of seniors, almost two‑thirds of the seniors. 

With wise use of generics, it is unlikely that more than a third of seniors will be affected by that gap.  Of that third, a fair percentage, I would say 50, 60, 70 percent, can actually afford that personal effort contribution. 

Now, I understand perfectly that there are those that can't.  That is why we made other contributions eligible, and that is why I hope the States will begin to define that for themselves and maybe make a phase-out rather than a cliff.   that is one of the refinements that has to take place. 

I notice that Mr. Hayes was very critical of the structure of the plan.  Earlier the issue was raised about the plan now costing $800‑and‑something billion.  That is over a different time frame.   I would remind you that using $1.3 trillion is not accurate because it is not a net figure. 

The original plan that competed with ours when ours was $400 billion was $1.3 trillion.  So, if ours has gone from $400 billion to $8 billion, theirs would have been gone from $1.3 trillion to $2.6 trillion. 

Having people make a personal difference is that difference between $2.6 and $800 plus billion.  Now, that is important, because seniors who can afford to help need to help, otherwise their children have to pay higher taxes.  Today, as we speak, 50 percent of all Federal spending goes to people over 65. 

Now, we want people over 65 to be secure financially and secure medically, but we have to do it in a way that those who can afford it carry more responsibility, and we did in the Medicare Modernization Act raise premiums, Part D premiums, for those with higher incomes.  This is following that pattern. 

I think we need to look at the margin; where does the 150, in my State it is 235 or 225 ‑‑ they keep pushing up.  Some States will need to go to 250.  Some need to go to 200 percent of poverty.  We have some opportunities in the bill to do that. 

I am much more concerned with the mechanics of the plan and leaving independent pharmacists exposed, as you line out in your testimony.  Mr. Wolfe, as you comment as well. 

While that is not the jurisdiction of this Committee, in fact, we are interested in those programs, those problems, and we will follow along with you and work with you to resolve them. 

My time has expired. Mr. Stark.

Mr. STARK.  Thank you, Madam Chair. 

Before I inquire of the witnesses, I just wanted to tell you that on our side, we are having so much fun that we want to continue this, so that we are going to invoke our rights under rule 11 to call witnesses to discuss Part D and have an additional hearing on this matter, and our letters outlined some of the witnesses that we would like to call. 

Having taken care of that little bit of business, I would like to ask Mr. Schiesser, you note in your testimony that a CBO study says that Part D plans should save 20 to 25 percent off retail, but your discounts are only 15 percent below typical cash prices, which I presume is retail.  Why the discrepancy? 

Mr. SCHIESSER.  I would have to look at the specifics of the CBO study, but my assumption is that incorporates estimates for savings related to formulary management and medical management.   I would say that what we seek is to maybe create a very clear apples‑to‑apples program for you. 

Oftentimes when we go in with State Medicaid programs, our company does a lot of Medicaid programs, and we are about to be doing that in Mr. Lewis's home State of Georgia and others.  We typically see that we are able to save about 10 to 20 percent versus what the State Medicaid program is providing for the costs of the pharmacy. 

Mr. STARK.  Even in States that had the lowest price? 

Mr. SCHIESSER.  Yes. 

Mr. STARK.  In California, where we had Medicaid, we had a lowest price requirement for Medicaid drugs, and we found that the prices paid have been higher. 

Mr. SCHIESSER.  What we are finding, sir, while I am not familiar with the numbers in California in particular, what I think we have seen nationwide is with many of the States stepping in and keeping their Medicaid flags on for the first few months of this program, and as CMS has put in place the demonstration project to reconcile those payments back to the States, one of the issues has been that typically the States have been paying more than the plans, and so CMS is having to step in to keep the States whole. 

Mr. STARK.  I am looking for the numbers, but I want to say at the beginning of this, you are to be commended.   I gathered that your loss ratio historically is right around 80, 81 percent for your medical plans; is that about in the ballpark? 

Mr. SCHIESSER.  For our Medicaid plan, that is correct. 

Mr. STARK.  That is good, I might add. 

 if you pull 5 percent, 6 percent, whatever you pull out of that for profit, you are still running around a 15 percent overhead.  From my limited experience, where we used to be able to talk about loss ratios, that is about as good as it gets in the private sector. 

How do you respond then to Mr. Emanuel's previous suggestion that if we had Medicare offer a plan, a direct plan in competition, they wouldn't be in competition with your managed care plans, but you don't have fee‑for‑service plans, so that is ostensibly what we would offer.  We would probably offer a three, four ‑‑ you can argue what the overhead of Medicare is, and presumably they would be able to buy at least as inexpensively as you can. 

Could you compete with us? 

Mr. SCHIESSER.  So, I think we compete with Medicare fee‑for‑service today on the Medicare Advantage side. 

Mr. STARK.  That isn't doing worth poop.  The Republicans will give that turkey up in no time.  It doesn't have, what, 5, 10 percent of the Medicare beneficiaries signed up? 

Mr. SCHIESSER.  In many of the markets in which we compete, Medicare health plans have more than 20 percent penetration in the market. 

Mr. STARK.  Wow. 

Mr. SCHIESSER.  In fact, in a market ‑‑--

Mr. STARK.  If you were a betting man, we could bet about how long those turkeys would continue to fly. 

Mr. SCHIESSER.  We are very bullish on Medicare, very candidly, even when other plans around the country were, say, less bullish on Medicare. 

Mr. STARK.  You mean Medicare Advantage? 

Mr. SCHIESSER.  Yes, sir, thank you.  We have always been committed to the program and trying to grow. 

Mr. STARK.  Well at 115 percent of what fee‑for‑service gets paid, it would take a genius to get into that and lose money.  You are getting a 15 percent bonus over what fee‑for‑service is getting for arguably perhaps providing more limited benefits.  So, that would be pretty tough to be in that racket and not make money. 

Mr. SCHIESSER.  I think ours ‑‑ and, please, I defer to your tremendous knowledge in this area, but some of the counties I have looked at, especially when you consider the graduate medical education component of the Medicare reimbursement ‑‑ for example, Broward County was one of the ones I mentioned in my testimony.  We are actually paid about a third of a point less than Medicare fee‑for‑service costs when you consider graduate medical education.  I believe if you don't include it, it is about 99.5, so it is darn close. 

Mr. STARK.  I would like to look at those figures, because that will be an unusual district that that would happen. 

My time has expired. 

Chairman JOHNSON of CONNECTICUT.  I would just point out that the legislation itself does allow the plans to circumvent the law that allows States to have Medicaid get the lowest price.  So, by circumventing those State laws that guarantee the lowest price to Medicaid, we are seeing, as you testified, Mr. Schiesser, that you can get prices below the Medicaid price.  We wouldn't have been able to get prices below the Medicaid price if we hadn't circumvented those State laws.  We are getting unusually low prices for that reason. 

It is, Mr. Stark, true that the figure you are putting on the record of 115 percent, that was driven by the Rural Caucus in the Congress that pushed the Medicare reimbursement rate for rural areas up.  So, when you average that out, it sounds higher.   he gets lower than that because he is not ‑‑ those plans that are not in rural areas.  So, the national average figures make it look like there is one price being offered, but the reality is that those are in the rural areas where there were no plans, and the goal was to pull plans into the rural areas; not a policy I agreed with, but that has pushed the average up. 

Mr. English. 

Mr. ENGLISH.  Thank you, Madam Chair. 

It is a real privilege to have you come and gone from Mercer County in my district and take your time to present your own perspective as someone who is out on the front lines, so I very much appreciate it. 

I have been hearing from a lot of local pharmacists that they have faced some special challenges in the implementation of this plan. 

A couple of things in your testimony I was very taken with.  In your county, as you know, as of April 18, nearly 15,000 out of the slightly over 21,000 individuals over 65 have prescription coverage.  There has been a significant number of people participating in this program. 

I was struck by one of your recommendations on prompt pay.  On the face of it, it is a sensible suggestion.  You suggested there needs to be a prompt pay legislation that would direct prescription drug plans to pay clean, electronically submitted claims within 14 days, and other clean claims within 30 days. 

I am curious.  How does this compare with the payment you received from other non‑ Medicare private payers? 

Ms. GRISNIK.  That is very similar.

Mr. ENGLISH.  Does the NCPA have a Part D plan, do you know?

Ms. GRISNIK.  Not that I know of.  There is community ‑‑

Mr. ENGLISH.  Community Care? 

Ms. GRISNIK.  Community Care.  I am not certain what the affiliation is. 

Mr. Everett.  What is that plan's payment policy? 

Ms. GRISNIK.  Their payment policy.  Now, I would have to double‑check to make sure with my secretary, because I do not check all of these, but I would say it is 14 to 21 days right now. 

Mr. Everett.  So, it is actually ‑‑ you are not even sure that it would fall within the 15‑day parameter. 

Ms. GRISNIK.  Right, 14.1.  I believe, don't quote me.  I could double‑check and let you know, Mr. England. 

Mr. ENGLISH.  I would be curious.  Our impression is that they pay more within a 30‑day time frame. 

Ms. GRISNIK.  I could check my records at the store and just let you know.

Mr. ENGLISH.  Is 30 days, in fact, an unreasonable time frame in which to pay claims?  After all, my experience with my credit cards is such that a 30‑day turnaround time is not unreasonable. 

Ms. GRISNIK.  Unfortunately we must ‑‑ our wholesalers electric fund transfer weekly, so it does put a strain on an independent pharmacy because we are paying our bills every week. 

Mr. ENGLISH.  Sure. 

Ms. GRISNIK.  It does put ‑‑ as you are putting out, the faster you can get it in, the easier it is to make those payments to your wholesalers.

Mr. ENGLISH.  You also state in your testimony that an adequate dispensing fee should be set at an adequate minimum level.  In your view, who should set that fee?  Should one fee apply to all plans equally, or would there be geographic or other variations?  How would you envision or your association would envision that fee be updated? 

Ms. GRISNIK.  That I would like to double‑check and get back to you.  I do feel it needs to be an adequate fee that would cover a pharmacist, at least their overhead. 

As I said, with a $2 prescription, there is no way that it even covered the bottle and the label for me just ‑‑ let alone I happened to be working and it is my business.   if I hire a pharmacist, I am paying large sums per hour and my technicians.  There needs to be some equitable fee so that we are getting paid for our ‑‑ at least for our overhead. 

I would like to double‑check.  I could get back to you with that information. 

Mr. ENGLISH.  I would welcome it.

[The information follows: PENDING]

Mr. ENGLISH.  Again, I appreciate your independent take on these things.  I guess my question is if the government starts setting dispensing fees based on the variables you referenced in your testimony, they will be subject to fluctuations, which at various points may help or hurt the pharmacies that we are trying to help here.  As a result, I am a little skeptical on how the fee structure would work. 

The other point I wanted to make, from your testimony, you bring up cobranding by drug plans, the use of company logos like Wal‑Mart on beneficiary plan cards.  What you found is that this has the potential to steer beneficiaries away from independent pharmacies. 

Ms. GRISNIK.  It does do that indeed.  I had a patient this past weekend who brought me his insulin that he could not buy from the other pharmacy.  He said, I guess I will have to pay full price here because you do not take my card. 

Mr. ENGLISH.  You also acknowledge, though, that CMS is attempting to address the issue.  Dr. McClellan in his testimony states that with the beginning of fiscal year 2007 marketing on October 1 of this year, PDP sponsors will not be able to place cobranding names and logos on their ID cards. 

This seems to me to be one of those areas where CMS has been responsive to a lot of complaints they have heard. 

Ms. GRISNIK.  Are they requiring them? 

Mr. ENGLISH.  Do you have any problem with what they are doing? 

Ms. GRISNIK.  No.  Are they requiring them? 

Mr. ENGLISH.  Absolutely.

Ms. GRISNIK.  Who is going to enforce it? 

Mr. ENGLISH.  CMS is.  It will be part of the contracting process.

Chairman JOHNSON of CONNECTICUT.  Will the gentleman yield? 

Mr. ENGLISH.  Certainly.

Chairman JOHNSON of CONNECTICUT.  It is part of next year's standards.  You can't do anything about it this year.  It is next year's because the cards have already been issued.   the next year's competition. 

Ms. GRISNIK.  That leaves a lot of time frame though.

Chairman JOHNSON of CONNECTICUT.  I appreciate that, but the cards are already out.  How are you going to do that?   we can do a better job of educating them.  We will talk to them about it.

Mr. ENGLISH.  Thank you, Madam Chairman.  I appreciate your coming from Mercer County to share. 

Ms. GRISNIK.  Thank you for having me. 

Chairman JOHNSON of CONNECTICUT.  Mr. Lewis.  I am glad to see, Mr. Lewis, that 69 percent of your seniors have signed up.  That is more than are signed up for the Medicaid ‑‑ who are eligible for the Medicaid program.  So, that is really great. 

Mr. LEWIS.  Thank you very much, Madam Chair.  Thank you very much.  Let me thank all of the witnesses for being here. 

Mr. Wolfe, Rite Aid must have customers that have already reached the doughnut hole.  Do you think you would have a customer that won't be able to afford that prescription under the coverage gap? 

Mr. WOLFE.  I am concerned about that, Congressman.  That is where I think Madam Chairman talked about some assistance programs that are available in States in Pennsylvania.  The Program of All Inclusive Care for the Elderly is looking to address that issue for lower‑income Pennsylvanians.  I think in other parts of the country, some private sector assistance programs along the lines of the manufacturer assistance programs could also go a long ways.  I was glad to here that Office of Inspector General (OIG) has set out a framework for a formula that would allow them to step in and offer some assistance in that regard. 

Mr. LEWIS.  Wouldn't it hurt your business if your customers are not able to pay for their prescription drugs? 

Mr. WOLFE.  More than their business, it would potentially harm the patient.  Our primary concern is that the patient get the medications they need; but certainly, yes, it would not be good for our business either.

Mr. LEWIS.  Do you plan to help any of your patients pay for their prescription drugs during the time ‑‑

Mr. WOLFE.  Congressman, we do help with that.  The pharmacies are held to their discounted rate that they have contracted with the payer and passed that to the beneficiary while they are in the doughnut hole. 

They do not revert back to a cash price. 

Mr. LEWIS.  Ms. Grisnik, thank you for being here.  Thank you for your testimony.  We have heard many stories to back up your testimony that payments to pharmacists by Part D, plan sponsor, are too low, too slow.  You have mentioned that some pharmacists have gone out of business. 

Ms. GRISNIK.  That is my understanding, yes. 

Mr. LEWIS.  Really.  Could you describe, what do you mean by too slow and too low; they are not paying enough? 

Ms. GRISNIK.  Well, the too slow, of course, is the time frame from the time the drug was dispensed and then you get the payment for the actual prescription.  Too low would be as an example, especially with our generics, that that prescription, that particular prescription I spoke of that is $2, was a generic prescription.  I can't dispense a prescription for $2.  I can't give somebody a prescription for $2. 

Mr. LEWIS.  You are independent.  You are not part of a big chain? 

Ms. GRISNIK.  I am not.  We own our own pharmacy.  We do have buying groups that help us facilitate buying so that we do get the best price possible.  So, we buy with several others.  We buy with large wholesalers, we buy with co‑ops to get the price of our goods down as far as we can.   I can't dispense a medication for $2.  That is it. 

Mr. LEWIS.  Do you have any idea how many other independent pharmacies, drugstores, will be forced to close if the pay is inadequate and too slow? 

Ms. GRISNIK.  If the pay is inadequate, especially on generic, it will not be just independents, it will hit the chains, too.  It will be devastating to the pharmaceutical community. 

Mr. LEWIS.  Do you have any recommendation for this Committee, for CMS? 

Ms. GRISNIK.  Well, they need to look at their payment structure, especially for generic. 

Mr. LEWIS.  Mr. Hayes, do you have anything to add? 

Mr. HAYS.  I will follow up on your question about what pharmacists can do when patients show up during the doughnut hole.  I do commend many pharmacists, community pharmacists, chain pharmacists, who did right in January and February to save the day, saved the lives in many cases for many people who had lost their Medicaid drug coverage and were being switched theoretically into the Medicare drug coverage.  Many really did help and simply gave free prescriptions.  Ultimately 35 or more States had to come in with emergency plans to help these folks. 

I think that what we heard today, though, is that is not something that the pharmacists continue do to do to bail people out to save folks' lives.  I think that is why probably most of us are here today to look for help from Congress. 

Mr. LEWIS.  Thank you. 

Madam Chairman, my time has expired.

Chairman JOHNSON of CONNECTICUT.  Let me just comment ‑‑ never mind.  Let me recognize my friend from Texas. 

Mr. DOGGETT.  Thank you so much, Madam Chair.  Thanks to all of you for your testimony and for staying here late with us through the votes. 

Mr. Hayes, we have seen, of course, this afternoon a tremendous amount of collective back‑patting and congratulatory comments about what a wonderful job has been done on this Medicare Part D program. 

I am interested in particularly the folks that I understand is one of the focuses of your organization; that is, folks who have qualified for the so‑called Extra Help program.  We are now down to 2 weeks, less than 2 weeks before the statutory or official deadline of May 15.  I know it has been extended for those folks.   what portion of those who are eligible to receive that help, the people that are in greatest need among our seniors for the prescription drug program, what portion of them are signed up in the great success we heard about today? 

Mr. HAYS.  According to most government estimates, there are about 8 million people poor enough to be eligible for this Extra Help program.  These are folks who simply cannot afford to pay their way through the doughnut hole, who cannot afford the copayments and the premiums. 

Ms. Disman from the SSA this morning, or this afternoon, I think, reported that about 1.7 million of those 8 million folks had, in fact, been enrolled.  I think that is 17 or 18 percent have enrolled up to now. 

Mr. DOGGETT.  After all the great efforts and all the great success that we have heard about today, and the people, the greatest need, the success rate is about 17 or 18 percent? 

Mr. HAYS.  That is correct.  Even comparing it, it was even depressing to me to have the witnesses earlier today.  To compare whatever, the Part D enrollment rate or, much worse, this low‑income subsidy, also known as Extra Help program, enrollment rate to food stamps, Medicaid and other disgraceful rates that we have for other programs is somewhat infuriating, I think, given the amount of human need to have a program that goes unmet, to have ‑‑

Mr. DOGGETT.  It really is.  The 17 or 18 percent is an F or an F minus, if there is such a grade, in my book, and that is the grade that applies, I think, in some other areas. 

Mr. DOGGETT.  To me, it has been a big question of whether the taxpayer has been fleeced in this bill more than the seniors, but I think there is enough of a problem to go around.  Much of that problem was also discussed by you, Ms. Grisnik, and it is consistent with the concerns that I have heard from many of the small towns that I represent particularly; and a little different population perhaps than you have, but similar concerns, where I have many people who speak most comfortably in Spanish and going to a community pharmacy down the block who can speak with them in Spanish about the counseling that they need and the interaction between the drugs is a big factor.   as I talk to some of those pharmacists, some of them tell me they get no dispensing fee at all for doing that for an extended period.  That has been the experience of you and some of your colleagues. 

Ms. GRISNIK.  I'm sorry?  No dispensing fee? 

Mr. DOGGETT.  That they receive no dispensing fee on the drug that they might provide counseling to someone about it at all.  They get zero. 

Ms. GRISNIK.  That is correct.  On that one prescription I got no dispensing fee.

Mr. DOGGETT.  Have you and your organization turned to the CMS people to ask that CMS intervene and try to assist on this dispensing fee issue? 

Ms. GRISNIK.  I have not personally.  Whether my organization has, that needs to be addressed, I am sure.

Mr. DOGGETT.  Another concern that I have had voiced from some of theses pharmacists is they do not get any electronic payments.  I am sure that the plans themselves expect to get electronic payments from the government, but this is not happening to the community pharmacists. 

Ms. GRISNIK.  That is correct.  Some are not doing electronic.  We get electronic payments from so many of our third parties.  It should be all. 

Mr. DOGGETT.  Basically the relationship between the individual pharmacists and some of these plans, the prescription benefit management organizations, is not dissimilar from that between an individual physician and a health maintenance organization; that all the bargaining power is on one side, and you are charged for making an inquiry if someone comes into your pharmacy and thinks they have coverage under a particular plan and you contact them, that you get a charge just for making an inquiry.

Ms. GRISNIK.  That is correct.  If you transmit on line to do an inquiry, you do get charged.  That is correct. 

Mr. DOGGETT.  So, you may get charged for making an inquiry for someone who did not keep up their premium or was dropped off a plan.

Ms. GRISNIK.  Yes.

Mr. DOGGETT.  That may be on the same prescription that you get no dispensing fee on.

Ms. GRISNIK.  That is also correct.

Mr. DOGGETT.  Thank you so much for your testimony. 

Chairman JOHNSON of CONNECTICUT  Thank you.  Ms. Grisnik, how frequently does the State pay you? 

Ms. GRISNIK.  Our State pays us every week.

Chairman JOHNSON of CONNECTICUT.  Are not many of your patients Medicaid or dual‑eligible and fall under that payment regimen? 

Ms. GRISNIK.  Our regular access patients pay us every week, but some have fallen ‑‑ they have routed them out to different HMOs and those, unfortunately, are not keeping up the same way. 

Chairman JOHNSON of CONNECTICUT.  In those instances where the State has stepped in and just paid while they straighten some of those enrollment issues out, have they paid promptly? 

Ms. GRISNIK.  In the beginning, from those particular ones? 

Chairman JOHNSON of CONNECTICUT.  That was about 2 or 3 months.

Ms. GRISNIK.  I would have to double‑check and get back to you.  Actually my office manager would know that better than I.

Chairman JOHNSON of CONNECTICUT.  Mr. Hayes, what percentage of that group are on Medicaid, this 17 or 18 percent? 

Mr. HAYS.  None, Madam Chairman.  The people who are on Medicaid were automatically enrolled into the extra health program so the 8 million folks that have been targeted by a lot of our groups to go out and enroll people manually, if you will, those are people who are still very poor but not Medicaid eligible.  Am I confusing that? 

Chairman JOHNSON of CONNECTICUT.  You are confusing numbers in the sense that when the witness from SSA testified, she was testifying to a very narrow group.  I do not know the relationship between her number and the other numbers, but the 150 percent of poverty and under presumably are in this group that the States and the Federal Government are transferring information about and hoping to work out and will not be affected by the May 15 deadline. 

Mr. HAYS.  That is correct.  The 8 million people who are eligible for signing up for extra help can do it May 16.

Chairman JOHNSON of CONNECTICUT.  So, it is not right to say that those who need it most are not getting it.  Those who need it most not only are getting it, but, because there have been problems in the system, they have no deadline. 

Mr. HAYS.  No.  The people who are getting extra help, the 6 million people with Medicaid, are indeed getting that extra help, Madam Chairman, but they lost their ‑‑ many States ‑‑ better Medicaid coverage in the process.  So, it is the people who really we are reaching out to ‑‑ 

Chairman JOHNSON of CONNECTICUT.  I appreciate that the ones that need it most are the ones like ‑‑ States like Connecticut and Pennsylvania subsidize, and other States.  The State has not been subsidizing them and they were paying themselves because they mostly did not have prescription drug coverage. 

Now a lot of what we are seeing in the 8 million that did sign up themselves were mostly people who did have prescription drug coverage before.  They are the ones we wanted to reach.  We think that by the time sign‑up is done, there will be 4 million not covered; 4 million not participating or not needing to participate; and of those, 2 million are expected to be in this group that is hard to reach, that is low income.  The other 2 million, it will not be clear exactly who they are until we get further down the line. 

To even be talking about 4 million or 5 million from 42 million in 125 days is an accomplishment.  That is all; I think it is important for the record to reflect.  It is important for the record to reflect that we still have a job to do, and it is also important for the record to reflect that we have had a better partnership than we ever had, and that some of the problems with the small pharmacies are due to the contracts.  As the Administration looks at what are going to be the requirements in the contracts in the future, which is what they are doing now, that is our chance to address contracting problems. 

The government has never set, to my knowledge, pharmacy reimbursement rates.  That is usually a matter of contract, and a pharmacy can choose to participate or not choose to participate. 

It is very helpful to have your testimony about what you see as the problems out there in the front line.  We will reread those just as carefully as anything else.  It is a great point of pride that so many of you have been out there, hands on, one to one; because, in a new program, especially when it involves insurance, should be one to one.  Nobody likes choosing an insurance plan, even if it is one their employer offers. 

I would have to say that on the Medicare Advantage plans, I had a senior in Waterbury, Connecticut give me a long lecture on why was I not talking about them more, because he was paying zero premium for drugs and some additional benefits, including co payments. 

So, these plans are offering a very good bundle of benefits.  The reason they can do it is because they can use drugs in preventative health to keep people out of hospitals and emergency rooms, and that cuts their costs. 

So, we can learn something from them, particularly as we move into an era in which we need to help seniors manage an array of chronic illnesses.  We do not need to be like them.  We just need to learn how to provide more integrated care, and the systems do that. 

We have a lot of options out there.  We have had some remarkable accomplishments.  We have some problems.  The only way to confront them is get them on the public record, which we have done today.  We will help to work out the remaining problems with you.  Thank you very much for being here.  We appreciate your attendance. 

The hearing will recess for just a few minutes. 

[Recess.]

Chairman JOHNSON of CONNECTICUT.  Before I adjourn the hearing, I would like to respond to the letter handed to me by my Ranking Member, Mr. Stark, and signed by the members of the minority.  It is a letter notifying that they want to have a rule 11 hearing.  It claims that we failed to include important witnesses necessary to enable the Subcommittee to fully examine the issues and they, at a minimum, would likely invite. 

Now they would like to invite a State Medicaid director.  They had requested that such a director testify at this hearing, and we did not have room for that.  So, that is one that we did not invite. 

They wanted to invite UnitedHealthcare.  We did invite UnitedHealthcare.  We also invited AARP.  Both of them rejected the invitation. 

Mr. DOGGETT.  Will the gentlewoman yield?  Just on the UnitedHealthcare, my understanding was that they agreed to come and they were not invited.

Chairman JOHNSON of CONNECTICUT. They were invited and they declined to come. 

We invited AARP, who works with them, and they declined to come. 

GAO and the Kaiser Family Foundation were discussed, and then we have an e‑mail dropping the request for them. 

You cite the OIG that you would like to invite, but you never suggested the OIG for this hearing.  In the letter you suggest that you would like to invite retiree coverage, raise the issue of retiree coverage, but you did not raise that issue before this hearing.  In the letter you asked to raise the issue of beneficiary membership organization, have a beneficiary membership organization testify.  You did just have that at this hearing, and he did a very fine job. 

So, I wanted to put on the record that of those that you say you were likely to invite, some we agreed to invite and they declined; some you dropped, some you invited, and others were not brought up.  Nonetheless, you have a right to have a hearing.  We have a right to set the time.  So, we are going to have this hearing tomorrow at 2 o'clock. 

Thank you.  The hearing is adjourned.

[Whereupon, at 6:39  p.m., the hearing was adjourned.]

CONTINUATION OF THE HEARING ON IMPLEMENTATION OF THE MEDICARE DRUG BENEFIT

Wednesday, May 4, 2006

U.S. House of Representatives
 Subcommittee on Health, Committee on Ways and Means
Washington, DC.

The Subcommittee met, pursuant to notice, at 2:50 p.m., in room 1100, Longworth House Office Building, Hon. Nancy Johnson (Chairman of the Subcommittee) presiding.

Chairman JOHNSON OF CONNECTICUT.  Good afternoon, everyone, and welcome to this continuation of the Committee's hearing on the implementation of the Medical Part D prescription drug benefit.  I am delighted to have another opportunity to talk about this program that is so important in the lives of our seniors and to talk about the remarkable partnerships that our Centers for Medicare and Medicaid Services (CMS) has developed with the private sector, unprecedented in the effort by any Administration and any part of the Government to get the public involved in a benefit that the Congress has funded.

Whether it is Food Stamps, whether it is Medicaid, whether it is Supplemental Security Income benefits, we have never seen such a high level of participation in 125 days as we have been able to generate in the Medicare prescription drug benefit, and that is because it is so important to the seniors of America.

From April 20 to April 27, 36,906 seniors were signing up per day.  From April 27 to today, 56,303 seniors per day are enrolling.  That is because, as I have seen in my own district, seniors are saving hundreds of dollars, thousands of dollars; in one instance, a couple saving $5,000.  If you lived on a fixed income, and that income was low or moderate, you, too, would want help with your prescription drugs, and I am very, very pleased that the Medicare Part D plan is serving seniors all across America, and we are on track by May 15 and the weeks thereafter, as low‑income seniors have a right to continue signing up, we are on track for Medicare Part D and other plans that working Americans over 65 are participating in to have 90 percent of the 42 million seniors in America with good drug coverage.

Over the next few months, I believe at least 2 of those last 4 million will sign up.  Even without them, a 90 percent coverage rate in 125 days of our 42 million seniors is an absolutely astounding record.  So, I am delighted to be here today to talk again about this program.  Of course, implementation challenges, we heard yesterday how those challenges were owned by the Government; never.

I have served under four Presidents.  I have served under many CMS administrators.  Never have I seen the Government so willing to take ownership of problems, create collaborative relationships to solve them, and put in place the ability to deal with the problems, to get to the people who need the benefit.  We heard about all the partners, over 10,000 partners yesterday; indeed, a remarkable performance, and one through which in the future, make no mistake about it, those partnerships are not going to service just in terms of getting people involved in the Medicare Part D benefit, which is important, but far more important than any one benefit, those partnerships are going to help us close the gap between minority and other senior groups in health care by giving us the means to reach out to our seniors and deliver to them the preventive benefits we passed the preventive benefits we have prepared in the Medicare Modernization Act which go directly to the issue of helping the seniors of America manage the chronic illnesses that plague their elder years.

So, those partnerships are just the beginning of a relationship that is important for government to be able to help its constituents lead healthier lives.  So, I am happy to be here, and I yield to my colleague, Pete Stark.

Mr. STARK.  Thank you, Madam Chair, and thank you for your courtesies in extending this hearing to accommodate additional witnesses.  I want to thank the witnesses who appeared today and appreciate their willingness to appear on such short notice.

Some proponents of Part D seem to believe that appearance may be as important as performance, but given the lives and dollars that are at stake, I am not sure that is an acceptable position.  This Committee should be rigorous in its oversight, and we have heard time and time again about this being the biggest change to Medicare since its creation.

Yet, yesterday was our first hearing, and we have a lot to cover.  With this law affecting tens of millions of people and spending up to a trillion dollars in the next 10 years, I think our obligation to account for that spending and know what is happening is paramount.  While, as you know, I am no fan of this program or the partisan process by which it was created, my Democratic colleagues and I I think have been very clear that we do not want to see it repealed.  We do feel that definitely, changes are needed.

The Administration and Committee leadership would like to chalk everything up to run of the mill implementation problems and suggest it is all being worked out.  I do not believe that is the case, and neither do our constituents, objective policy experts, State Medicaid directors, many physicians and pharmacists.  The problems seem to run far deeper, and while I must acknowledge there is not much we are likely to be able to do this year‑‑we never seem to be able to do anything courageous in even‑numbered years, but if we had to resort solely to parliamentary tactics, I think this would be unlikely.

Once the Committee has a full and common understanding of the situation, I hope we can use what we have learned to improve the program, and today's witnesses should give us a broader understanding of how the law is affecting the beneficiaries, including those most vulnerable, for whom this law was allegedly targeted.  The witnesses, I think, will help us understand why it is difficult for the beneficiaries and their advisors to navigate this program and help clarify the record with respect to drug prices, and we are going to hear from United, the American Association of Retired Persons, the largest Part D plan, and they are already covering, I think, 4.5 million beneficiaries and have received $4.5 billion or thereabouts from CMS.  Seems to me that they were an outstanding witness to hear from.  We are going to hear about the importance of oversight and making the data publicly available.

We have 56,000 enrollees a day.  If that is the correct figure, we would need 130 more days to get the remaining 7.2 million enrolled, and I did that math with my shoes and socks on.  Yet, we only have 11 more days, so that by token, we are hardly going to get 560,000, 600,000 in.

So, the next step, I believe, is to extend the deadline and also the corresponding late enrollment penalty.  To do so at this hour would achieve the goal of having a deadline to hasten enrollment but not penalize those who have not been reached, were misinformed, could not navigate the system, procrastinated, and it would probably only bring, according to CMS' concern, more healthy people into the program, and that is exactly what we want to do.  That will hold the cost down.

So, I look forward to today's testimony and discussion to see if we can get closer to getting those last 7 or 8 million people in the program.  Thank you.

Chairman JOHNSON OF CONNECTICUT.  Thank you.

Welcome, Mr. Waxman.

STATEMENT OF HON. HENRY WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. WAXMAN.  Well, thank you very much, Madam Chairman and Members of this Committee.  I am honored to have been invited to come to the Committee on Ways and Means and talk about the subject of this Medicare prescription drug benefit, but I do not need to tell anyone on this Committee of the problems with the new drug benefit.  You have all been back to your districts and heard the complaints from seniors who cannot get the drugs they need, or cannot cut through the plans' complications -- the dozens of different plans, each with different copays, premiums, deductibles, and formularies -- to sign themselves up.

Now, as the May 15 deadline for enrollment looms, millions of seniors face life‑long penalties for not signing up for this flawed program in time.  The Medicare bill is increasingly looking like a poor deal for too many seniors.  The new program is incredibly complicated.  Too many of our most vulnerable seniors are falling through the cracks, and it is costing seniors and the taxpayers too much.

One of the justifications for the plan's confusing scheme involving dozens of private insurers is that these plans would be able to provide seniors with lower prices.  This is simply not the case.  The prices that the plans are charging seniors are way too high.  They are well above prices that aggressive Government negotiators like the Veterans Administration (VA) pay.  They are well above the prices that consumers pay in Canada.  They are even higher than the prices available through large retailers.

I would like to give you a few examples of the kinds of price differences that we are seeing.  Recently, my staff looked at the prices offered by 10 leading Medicare insurance plans for 10 popular brand name drugs.  The average Medicare prices were more than 75 percent higher than the prices negotiated for the Federal Government by the VA.  They were almost 60 percent higher than prices in Canada.  They were higher than the prices at Drugstore.com or Costco.

With the new Medicare plans, beneficiaries pay an average price of $111 for the ulcer drug Protonix, but the Federal Government pays only $24 for the same drug, a 425 percent difference.  Similarly, Medicare beneficiaries pay an average price of $129 for the heartburn medication Nexium, but consumers in Canada pay only $67.

The prices offered by the Medicare drug plans did not just start out high.  They also went up, and they did so rapidly.  CMS began posting information on the prices offered by the Medicare drug plan in November 2005, and seniors began choosing plans and signing up in December.  At this point, many were locked into a plan.  In February, my staff looked at whether plans were increasing their posted drug prices for beneficiaries.  They found that in the first two months of the Medicare program, the drug plans increased their prices by over 4 percent.  The vast majority of plans increased their prices, with some plans increasing prices by over 10 percent.

These price increases in the first two months of the program were greater than the inflation rate for all of 2005.  They were over twice as high as drug price increases in Canada, and contrary to critics of the analysis, they increased even faster than the published average wholesale price for the same drugs.  These massive price differences and the rapid price increases make little sense.  For beneficiaries, they increased out of pocket drug costs, reduced purchasing power, and undercut the assistance provided by the Medicare drug benefit.  For taxpayers, who will also end up footing the bill for higher drug prices, they will ultimately mean billions of dollars in extra costs.

There are other problems with the Medicare drug benefit as well.  One of the biggest complaints that we have heard from seniors is they are not able to get the drugs they need, and they are encountering hidden restrictions on drugs that are listed on the plan formulary.  The problem is that plans are using additional tactics to restrict use.  They require prior authorization before a drug can be prescribed or limit the quantity of a given drug that they will pay for or require that the beneficiaries use a different drug first.

The use of these restrictive tactics mean that even if seniors have carefully researched a Medicare drug plan, they can still encounter obstacles in obtaining medications.  While the use of restrictive tactics by Medicare drug plans is widespread, the disclosure of their terms is virtually nonexistent.  Over two‑thirds of the Medicare drug plans contacted in a phone survey were unable to describe accurately how prior approval, step therapy, or volume limits worked with their particular plan.  Several times, plans were called twice consecutively and gave completely different answers to identical questions about whether plans restricted access to drugs and how these restrictions worked.

The net result of all of this is that even if they carefully researched the plan, too many beneficiaries cannot get the medicine they need.  The complexity of Medicare Part D is putting many seniors in a Catch 22 predicament.  They are not able to make a fully informed choice about a Medicare drug plan without knowing whether the plan will limit their access to drugs listed on the plan formulary, but even though the use of these restrictive tactics is common, it is nearly impossible for seniors to learn their terms until they have already subscribed and then been denied access to the drug.

Well, over and over, we talk to seniors; we investigate the facts; we come across a common theme:  the Medicare prescription drug plan is not working for seniors.  It is too complex.  Many seniors are unable to sign up; are unable to get the drugs they need when they do sign up for a plan, and the plans are just not able to control prices and give seniors the low cost that they were promised.

We need to take another look at this Medicare plan.  Clearly, given the complexity and confusion surrounding the program, we should extend the May 15 deadline.  Seniors should not be penalized because Congress passed the legislation that created this flawed drug benefit, and we should do all that we can, including letting the Government negotiate for better prices to guarantee that seniors and taxpayers get their money's worth.

Thank you for this opportunity to make this statement, and I would be happy to answer any questions that Members may have.

[The prepared statement of Mr. Waxman follows:]

Chairman JOHNSON OF CONNECTICUT.  Thank you very much, Representative Waxman.

You know, in Fort Smith, Arkansas, the St. Boniface School sixth graders took on as their community service project learning to use the Pathfinder, and under instruction, with careful instruction, they learned to use it.  One day a week, they dedicated to signing up seniors in their hometown, and they signed up 300 seniors.  Ethan said to the First Lady when she visited down there recently to commend them, he said, this is a mountain out of a molehill.  This is not hard.

I tell that story because I have had many a senior call to my office and say, oh, this is so complicated.  We say, have you tried it?  They say, oh, no, no.  In the papers, they say it is so complicated.  I said, well, try it.  Let us help you try it.  Indeed, when they get their prescriptions written down and their number written down, they find it not so hard, and the proof is in the pudding.  In the Kaiser Family Foundation survey, they found that 54 percent of the seniors who were signed up chose their own plans.

When you put that up against the overwhelming satisfaction rate and the majority that either understood very well or well their plans, you have to say that when you use the tools that are provided, and you follow the directions, seniors are finding this a wall they can penetrate, and they are signing up in droves.

You also have to consider, at least I am surprised that you do not take a little more time to think through the extraordinary partnerships that the Government has developed with the Hispanic community, the National Association for the Advancement of Colored People, black churches; well, out at Martin Luther King's own church, they are having yet another signup.  At black churches throughout America, there have been signups.  There are Hispanic hotlines, Spanish‑speaking hotlines in many States in many areas; Meals on Wheels, it really is about time Government understood they need to speak to people where they are, and if they cannot speak to them through the written word or the computer word or the telephone voice, they need to speak to them one‑on‑one, person‑to‑person.

That is what is different about this outreach area.  You and I worked hard on getting the children's health plan in place, nothing the was extraordinarily disappointing to see the first year signup numbers.  They were pathetic.  Even after five years, they were pathetic.  Even now, in Connecticut, with enormous resources dedicated to getting people into what we call Husky, still, in my hometown, with a Federal grant, with someone stationed in the emergency room, half of the, quote, uninsured were covered by either Medicaid or Husky.

So, this is quite a remarkable performance that such a huge percentage of our seniors are going to be signed up if they needed to be signed up by May 15.  So, I hear what you are saying about the problems.  There have been problems.  I assume that you were very pleased with the Administrator's announcement about the policy governing formulary changes recently, which straightens out a lot of the problems and will give him a chance to set down new markers in the next round of contract requirements.

Mr. WAXMAN.  I thought that was a good proposal to say that they could not take the drug off the formulary once people had signed up and were using that drug.  There is no requirement that is going to keep a plan from doing that.  It is simply a guidance.  There is nothing in statute to keep them from changing the policy later.  Second, it does not deal with the price increases for those drugs.

Chairman JOHNSON OF CONNECTICUT.  A point of note, though.  The fact is that part of his announcement was that they have always had to come to CMS and inform CMS, but he made clear that CMS would only accept changes in the formulary where a new generic had come onto the market or safety concerns had been raised about a drug that was part of the formulary.  So, it was not just that if you were on a drug you could continue taking it.  It also very much changed the flexibility of the formulary during the calendar year.

Mr. WAXMAN.  It did nothing about price increases.  Once you sign up, and you get that drug, that drug can increase in price quite rapidly, which is, of course, a problem for seniors, and‑‑

Chairman JOHNSON OF CONNECTICUT. I am sure my colleagues will have lots to say with you about the pricing.  I wanted to limit my comments, because we do find that we really have to with so many Members stay within our 5 minutes, and as Chairman, I wanted to stay within my 5 minutes, and as Chairman, I wanted to stay within my 5 minutes.  I agree with you there is a lot to be said about pricing and a lot to be said about the success of this program in lowering prices.

Mr. Stark.

Mr. STARK.  Thank you, Madam Chair, and thank you very much, Henry, for being with us.

I want to ask kind of a type of inquiry that I know you will hate, and that is to ask you to be your own devil's advocate for a moment and explain, if you can, if you can take the other side, CMS seems to dispute some of your data on popular drug prices and the question of Costco being lower.  Can you explain what their objection to your analysis is and why you think your data is the correct way to look at the prices in Part D?

Mr. WAXMAN.  Well, there are some important differences between the CMS studies and our studies.  Our pricing studies show that private Medicare drug plans are not obtaining good prices on the drugs used by beneficiaries and that other negotiators, like the Federal Government, could get much lower prices on the brand name drugs that account for the majority of drug costs.

One big difference between the studies is that the CMS study mixed together both brand name drugs and generics, and this made their price savings seem bigger than they actually are.  The most important area where seniors need to save money is on expensive brand name drugs, and the Medicare plans just are not able to provide those savings.

Second, the CMS study inflates price savings by comparing Medicare drug plan prices to an inflated cash price that does not reflect what seniors are really paying at the pharmacy counter.  Our study compares prices to four different benchmarks:  the Federal negotiated VA price, the Canadian price, the prices at Costco and Drugstore.com.  These comparisons show that Medicare plans are not obtaining the low prices.  Finally, the CMS study takes into account the impact of the Federal subsidy for all beneficiaries who sign up for the drug plans, which average about $1,600 per beneficiary.

So, the CMS study shows that seniors save money when they take advantage of the subsidy, but it does not show that Medicare plans are negotiating low prices.  There are other flaws with the CMS study as well.  For example, it fails to take into account the fact that Medicare drug plans can and do raise prices at will, and our study shows that Medicare drug plans are not able to obtain low prices for seniors.  The CMS study has so many differences and so many important flaws that I think it fails to address this issue.

Mr. STARK.  Thank you very much.

Thank you, Madam Chair.

Chairman JOHNSON OF CONNECTICUT.  Mr. Johnson.

Mr. JOHNSON OF TEXAS.  Thank you, Madam Chairman.

Henry, can I quote you?  You said‑‑

Mr. WAXMAN.  Well, you can.  Are you able to?

Mr. JOHNSON OF TEXAS.  Yes, I have it right here.

Certainly, there were people who were not covered before who are pleased to have new benefits.  Certainly, we all welcome success stories, and we want this benefit to work.  For too many seniors and persons with disabilities, it has not worked.  It has been a disaster.  I wonder how you can say that when 68 percent of the seniors in your district have signed up for this plan.

Further, you said drug prices under the new Medicare drug plans are too high, rising too fast.  The Medicare drug bill was written to enrich the drug companies, not to provide seniors with a cost‑effective, new benefit, and the Bush Administration mismanagement and incompetence has made the problem worse.

You know, with the number of seniors that have signed up in your district, I wonder if they think the prices are too high.  I would suggest to you that our studies show that they have gone down, as a matter of fact, quite a bit from where we first estimated they will be.

Mr. WAXMAN.  Well, Mr. Johnson, I do not know whether 68 percent of the people in my district have signed up or not, but the fact they signed up does not mean they are happy, or they are satisfied with this drug plan, especially for those people who signed up and then found out there were restrictions on the availability of drugs that they intentionally checked to be sure were on the plan's formulary.  So, a lot of people have come to me and complained about that.

I look at this whole drug program, and I do not see savings.  I see the plans not holding down the prices at all especially when you compare it to situations where the prices are held down, where the Government negotiates for the VA, and I am sure you are familiar with that, or even when the Government used to negotiate for the Medicaid program.  Or you look at Costco.com, and when people shopped around there, they often got a better price than these plans are paying.

I am pleased that we have a step in the direction of a drug plan, but I think it is a flawed one, and I think we should learn from our experiences to see where we need to change this program, because the essential point of it is we were going to hold down drug prices through competition.  There is no real market there.  The prices are not being held down.  That means that seniors and the Government taxpayers are overpaying for drugs.

Mr. JOHNSON OF TEXAS.  Well, in my district alone, there are 25 companies offering it, and they are competing against each other, and the prices are down.  Maybe you ought to go back and take a look at your district again.

Thank you, Mr. Waxman.

Mr. WAXMAN.  Thank you.  Perhaps you want to look at yours again, too.

Mr. JOHNSON OF TEXAS.  Thank you, Madam Chair.

Chairman JOHNSON OF CONNECTICUT.  Mr. Doggett.

Mr. DOGGETT.  You know, Mr. Waxman, thank you for your vital leadership.

As I listen to your description of the way this drug plan has worked versus the spokespersons for the Bush Administration yesterday and the opening statement of our Chairwoman, it is almost as if you were describing two entirely different worlds.  I find that the world you are describing is the one that is what my seniors throughout Texas have been telling me, what a pharmacist in Mission, Texas is telling me about the problems that he encounters, and the very personal experience‑‑my mom is 88 years old and seems to have kind of a pharmacy on her table when I go by to see her.  My daughter, who is a physician, went to work to try to figure out which plan would work best.  If she had gone with what appeared to be the best plan first, my mother would have been paying more for prescriptions than the huge price she was paying before this plan.

Finally, through a lengthy process that eventually involved consultation with my mother's various physicians, she has what she thinks is a savings for my mom, and even that may have been lost now that my mother has been switched to some additional prescriptions because she has some new problems.

I am confident that we can turn over this entire plan to sixth graders in Arkansas or Texas or California or Connecticut to punch in things.  In fact, we can turn it over to preschool kids, and they will get people signed up.  Many of them have more experience with computers than the seniors that I represent.  It does not mean that they are going to get them a plan that saves them any money or meets their needs and addresses the problems that you have addressed.

Mr. WAXMAN.  Well, Mr. Doggett, I would go to a sixth grader to learn to use my iPod or my computer, but I would not go to them to pick out an insurance plan.

Mr. DOGGETT.  Well, I am sure that they can pick, but whether they pick one that will meet the concerns you have and will lower prices is quite a different question.

My concern has been not only the treatment of our seniors‑‑I think some of them are being fleeced by this sort of plan‑‑but that the taxpayer is being fleeced also.  You remember the history that it took a great deal of deception from the Bush Administration, hiding the true numbers of the cost of this legislation, most of all from some of the Republicans who ended up voting it in the middle of the night when the rules were twisted here, and we were here all night long to force through this bill through the House.

Now, the fact that the Government is prohibited from negotiating on behalf of Medicare beneficiaries the way it does for our veterans through the VA means that ultimately, not only the seniors, but the taxpayers have to pay more.

Now, I raised this concern yesterday with Dr. McClellan, and he questioned the study that you have done that you reported on today, and though he said the VA program was great for veterans, he was unwilling to apply this same approach to help our seniors and to help American taxpayers get more cost benefit for their tax dollar.  I just wonder if you might‑‑I think you are familiar with this criticism of your average wholesale price analysis, if you might have any response to those criticisms of what I thought was a very important study that you and your staff have provided.

Mr. WAXMAN.  The bottom line is that the survey by my staff showed that the Medicare plans were unable to adequately retain low prices for seniors.  It is absurd that in the first few months of the program, prices went up 4 percent.  Drug plans should not be allowed to increase prices on consumers after they sign up for the plan.  They should not be allowed to pull a bait and switch on the consumers.  It is good that they now are supposed to keep the drug on the formulary once someone is using it, but they should not allow the price to go up, and they certainly still allow that.

Medicare price increases are likely to continue.  The latest estimate by CMS actuaries shows that they expect drug price increases under Medicare plans to be higher than the inflation rate for the next decade.  Well, that is going to affect all seniors.  The price increases reduce their purchasing power.  They will use up their benefits, and they will enter the doughnut hole much faster than anticipated.

The statements by CMS yesterday were incorrect.  My staff found that Medicare plan prices were going up faster than other benchmarks, but CMS said, well, not over the average wholesale price.  If you look at the Canadian prices and other benchmarks, it is just clearly going up faster.

Mr. DOGGETT.  Finally, you performed a great service in requesting this Government Accountability Office (GAO) study of the bureaucracy that is administering this complex plan.  I think that showed that on the most important question of what is the best plan for you in terms of lowest cost that CMS was advising either incompletely, inaccurately, or no answer at all 60 percent of the time.

Mr. WAXMAN.  Well, they not only gave inaccurate information to seniors, but they gave them to sixth graders who were advising the seniors.

[Laughter.]

Mr. WAXMAN.  That makes me angry.

Mr. DOGGETT.  Thank you.

Mr. WAXMAN.  Thank you.

Chairman JOHNSON OF CONNECTICUT.  Mr. Ramstad.

Mr. RAMSTAD.  Thank you, Madam Chairman.

You know, I have been here 16 years, and I really tried to work in a bipartisan, pragmatic way on issues.  It is really disappointing to see ‑‑ I understand politics.  I have been around that world a long time.  To politicize, as some are doing‑‑I am not referring to the witness nor to any of my colleagues necessarily, but I think to politicize the most important expansion of Medicare, the biggest entitlement since the Great Society programs I think is really unfortunate, and I think it does a disservice to this institution.

It is one thing to be critical of the program or the rollout.  We can all be critical of the way dual eligibles were mishandled at the beginning, and I think corrections have been made.  I think to cast it in political terms, Republicans versus Democrats, is really unfortunate.  I hope we can get away from that and work more in a bipartisan way to see this program implemented so that it does benefit the seniors of America.

We are going to hear later from a witness, the Vice President of Ovations, which is a business unit of United Health Group, the only company, by the way, to currently offer the new Medicare prescription drug benefit in all 50 States and the District of Columbia.  Since January 1, they have processed over 50 million prescription drug claims with beneficiaries yielding savings consistent‑‑I am reading from their testimony now‑‑consistent with CMS' estimate; $1,100 per year, the average beneficiary is saving, that is, beneficiaries who, prior to the benefit, lacked prescription drug coverage, had no prescription drug coverage.

So, I think we have to recognize the pluses of this program, and I know that you have said, Mr. Waxman, previously, that the Government should implement a standard benefit‑‑and this is a reasonable position‑‑you said the Government should implement a standard benefit, with the premiums set at $35 a month.  Well, the latest estimates of the average premiums are $25 a month under Part D.

Do you want to raise seniors' premiums?  Is that what the $35 figure suggests that you‑‑

Mr. WAXMAN.  No, I want a standard benefit.  There is no guarantee that those premiums are going to stay low.  They can go up much higher next year.  Low premiums this year could be an enticement to get people to sign up in a plan by saying, oh, we are going to have a low premium for you.

Look:  you are right.  We have got what we have got, and I think the fair thing for people to do is to look at the facts.  There are problems with this drug benefit.  There are positive parts of it as well, but there are problems.  For our colleagues to say what a great success it is is just not credible, because it is not a great success when we are hearing so many complaints and so many problems, partly from the rollout and quite a bit, I think, because of the way the whole program has been structured.

Mr. RAMSTAD.  Well, I could take my remaining time and tell you of my constituents' success stories, those who have benefited significantly from it, people who were previously uninsured, and literally, as we have said around here many times, had to choose at the end of the month between putting food on the table and buying their necessary prescription drugs.

Mr. WAXMAN.  That is why we need a drug plan, but let me just‑‑

Mr. RAMSTAD. The low‑income seniors have certainly benefited the most.  That cannot be denied.  Also, when I hear how drug costs have increased, it just does not‑‑the empirical data suggests that the top 20 drugs have all‑‑the costs have come down as a result of this drug benefit, and we can show you that empirical data, so I

think‑‑

Mr. WAXMAN.  I do not think you will be able‑‑

Mr. RAMSTAD.  ‑‑facts are stubborn things, and we are all entitled to our own opinions but not to our own facts.

Mr. WAXMAN.  Right, that is why I do not think you will be able to establish that.  I think you will see that the prices have gone up.

Mr. RAMSTAD.  I will be glad to meet with you and share with you those figures.

Mr. WAXMAN.  I also want to point out that CMS' own actuaries say that the premiums are going to increase by 28 percent, to $32 next year.  Well, plans can choose to go lower or higher.  There is just no way to know what they are going to do.  They are going to be under a lot of pressure unless they can hold down the price of drugs, and that is something we want them to be able to do.

Mr. RAMSTAD.  Well, I certainly concur with that, and that is a key variable and a crucial variable.  There is no question about that.

Well, with that, I appreciate your being here, Mr. Waxman, and yield back the balance of my time.

Chairman JOHNSON OF CONNECTICUT.  Mr. English.

Mr. ENGLISH.  Madam Chair, thank you for the offer of time, but I think I will yield back in order to allow this proceeding to move to its inevitable conclusion.

[Laughter.]

Chairman JOHNSON OF CONNECTICUT.  Would the gentleman yield, Mr. English?  If you are not going to use your time, there are a couple of things I did want to just put in the record.

Mr. ENGLISH.  I would be delighted to yield.

Chairman JOHNSON OF CONNECTICUT.  I do want to put in the record the fact that your study uses average wholesale prices, does it not?

Mr. WAXMAN.  That is one of the benchmarks, but it also uses the Canadian prices, the VA prices, and the Drugstore.com prices.  So, we have a number of benchmarks.

Chairman JOHNSON OF CONNECTICUT.  I would just point out that the average wholesale prices are so irrelevant to the actual price of drugs that we have moved away from those to other kinds of pricing mechanisms to try to judge market prices and also by excluding‑‑

Mr. WAXMAN.  Well, we did not use it.  That was the CMS criticism of it.

Chairman JOHNSON OF CONNECTICUT. Also, by excluding generics, you do not give anywhere near an accurate picture, because more than half of the prescriptions that seniors use are generics.  Then, when you extol the VA, you sort of ignore the fact that 20 of the 33 prescription drugs that seniors most commonly use are not on the VA's formulary.  Part of their low price structure is their limited formula range.

So, I wanted to put those facts on the table, but I will now recognize J.D. from Arizona.

Mr. HAYWORTH.  Madam Chairman, if I could yield to my good friend from Missouri.

Chairman JOHNSON OF CONNECTICUT.  Fine.

Mr. Hulshof from Missouri.

Mr. HULSHOF.  Henry, if you will allow me to be so familiar.

Mr. WAXMAN.  Kenny, do you want to have a beer and discuss this?

Mr. HULSHOF.  Well, maybe we should.  Actually, maybe we should adjourn and head down to, well, I probably should not name one of the lounges.  I am obviously looking at my staff for guidance here as to where a local lounge would be.

[Laughter.]

Mr. WAXMAN.  Well, we have our gym time coming up.

Mr. HULSHOF.  In fact, here is the point, and I want to echo what my friend Jim Ramstad had to say.  Somewhere in that answer to him, you acknowledged some positives.  I think that is where, when I hear some of the incendiary rhetoric from some, I think we are talking past one another.  Because we acknowledge‑‑I will speak for myself; I acknowledge, as I did yesterday, there have been glitches.  We have dealt with early on some complaints from senior citizens.  We have tried to help walk them through.  We have focused them to‑‑we have a very good Division of Aging back in Missouri who has helped sign folks up.

I just wish there were more of an honest discussion about and acknowledgement that there are pluses and minuses, and so, that is an editorial comment you do not need to address.

I do want to mention one thing.  Your critique of CMS, one of the critiques that you mentioned was that they include both brand names and generics in these positive numbers, and that is a criticism or a critique that you have made.  Yet, you praised the VA for its formulary, and in fact, the VA formulary is predominantly generic and some brand name.

I point that out the on the one hand, there is a critique because both brand name and generics are included, and yet, there is a lot of praise for the VA formulary when, in fact, it is more heavily tilted toward the generic.  In fact, 20 of the top 33 drugs by seniors are not on the VA formulary.

The other concern I have as far as any sort of movement toward the VA, in Missouri, we have five VA pharmacies.  We have 1,084 regular pharmacies.  So, that is a concern.

Mr. WAXMAN.  Can I just clarify?

Mr. HULSHOF.  Sure, I will yield to you.

Mr. WAXMAN.  I certainly want generic drugs to be substituted.  They are the same drug as the brand name drug, and they should be substituted.  We are not talking about trying to discourage the use of generics.

When they took brand name drugs and generics and put them together to show they were getting lower prices, it ignored the fact that 90 percent of the cost of the drugs for seniors is the brand name drugs.  So, we have to look at the reductions in the prices of the drugs that cost the most.

The VA, for example, the VA does not restrict people's access to whatever drug they need.  They encourage the generics, as they should, when there is one, but they do not deny, nor did Medicaid, but they do not deny access to the brand name drug you need when a generic is not available.  We want that available to people.  Yet, they were able to hold the prices down, because they use the buying clout of the veterans to negotiate a lower price.

My problem is that we have foregone that, and I think that already, we are seeing this claim of a market holding down prices not working.  If it does not work, then, we are going to have to look for some other alternatives.

Mr. HULSHOF.  Well, the other side of the VA equation is that nonformulary prescriptions are approved by the VA only when the patient meets one of six very narrow tests, whether there is a contradiction to formulary drugs, adverse reaction, therapeutic failure, no formulary alternative exists, and number of these other areas.

Let me move on in the interests of time, and we have other witnesses coming.  We can discuss and debate the CMS critique that you have, and yet, I think you also quoted the Medicare Trustees' Report, which came out earlier this week, and quite frankly, the Trustees' Report essentially says that program costs are down 20 percent; 15 percent of that savings is due to lower drug costs; and 5 percent savings due to plans, private plans, negotiating aggressively.

So, again, I do not want to talk past you, but I would hope that it is easy when you are back home, and if I wanted to have a town meeting, and I wanted to talk about ethanol, and I send a letter out to all the corn farmer constituent friends that I have, obviously, we are going to have a very pro‑ethanol meeting, and if I have been talking about a flawed program and confusing scheme, and if I have been vehemently opposed to a prescription drug benefit, and if I wanted to call a town meeting and send out a mailing, of course, I am going to have people who are quite critical of the program.

Again, that is not a comment on you or any of your testimony, and I appreciate your prejudice.

Mr. WAXMAN.  Well, that is a good point that you make.  In other words, you are saying if we are criticizing the plan at a town meeting, people will get a negative view of it.  I do not think they really need us to criticize it for them to get that negative view, because they feel they were promised a drug benefit under Medicare, like they get doctors paid by Medicare, they get the hospitals, they get the physical therapists all paid.  It is a benefit, and it is covered.

I think it is as if you went in to buy a Lexus, and they gave you a clunker.  It is better to have a clunker than nothing, but you feel a little let down that you did not get what you thought you were being promised.

Chairman JOHNSON OF CONNECTICUT.  Mr. Rangel.

Mr. RANGEL.  Thank you so much for the courtesy, Madam Chairlady.

When you inquired of Mr. Waxman of the number of people who had enrolled into this program and said it was 68, I was amazed at that number based on how bad I am doing in my district, so I asked staff to see whether they could get from CMS the same type of material and found out they had 76 for my district.

So, then, I read it further, and I find out that not only do I have 76, but they expect to increase that to 107 percent.  In some districts, they expected 112 percent.  So, knowing that meant the numbers were padded, I just want to figure out how did they get the 76 percent?  Being honest, as the Administration normally is, they included all sources, which meant that anybody who had any coverage of any kind, including retirees or those that are dual beneficiaries that were forced to go into the program because it was Medicaid, they were pushed into this.

So, in fact, this number has very little to do with those who have enrolled.  It means those who have coverage.  Then, looking up here, it really said that:  Medicare beneficiaries with prescription drugs coverage, which has absolutely nothing to do with the prescription drug program that is Part D.  So, I know the staff probably overlooked that, but I just wanted Henry to know things are not any better than you thought they were.

Mr. WAXMAN.  Mr. Rangel, if I could say something about Medicaid, which is in the jurisdiction of the Energy and Commerce Committee‑‑

Mr. RANGEL.  Oh.

Mr. WAXMAN.  Used to be in your jurisdiction, and who knows what the future will be?

The fact of the matter is the people under Medicaid had‑‑they knew they got their drugs covered.  It was being paid for under the Medicaid program, and it was also being paid for at the lowest price, because the States and the Federal Government negotiated and got that lower price.  They insisted on the best price; there were rebates.

So, we took them away from the Medicaid programs and shifted it over to Medicare.  So, we do not have those negotiated lower prices anymore.  So, we are paying more for the Medicaid and Medicare dual eligibles, for their drugs, and they have less of a certainty that their drugs are even going to be covered.

That cannot be a good deal.  Now, I do not want to be only negative about it, but that is not a good deal.  If you think about a it for a minute, if you are somebody who needs a certain drug, and you check with a 6‑year‑old or sixth‑grader, and the sixth‑grader says that your drug for high blood pressure, or let us say it is an antipsychotic drug is on the formulary, and you sign up with that drug plan to be sure you get that drug, and then, after you sign up, they tell you, oh, by the way, you cannot get that drug; you have to use another drug.  Then, if that drug does not work therapeutically, then, you could step up.

Well, they have already gone through this.  To tell somebody, let us say, who needs an antipsychotic drug that they cannot get the one that is working for them any longer, you could see how angry they could be, not just because they did not have their drugs to calm them down.

[Laughter.]

Mr. WAXMAN.  They would be angry because they thought they were signing up in a plan that was going to give them the drug.

So, anyway, I think there are real problems in this.  We ought to be mindful, all of us, Democrats and Republicans, of what is working and what is not and then address the problems where the program is not working, because we owe it to the American people to do better.

Mr. RANGEL.  Well, even though the Medicaid people are paying more under the Part D, and even though the dual beneficiaries pay more than they would normally pay, at least you know that they should be on it; that they are included as new enrollees in the plan.

Mr. WAXMAN.  Well, we are paying more for them, because Medicaid beneficiaries do not pay those co‑pays.

Mr. RANGEL.  Based on your experience, could you give us one reason why the Government would not want Medicare to be able to negotiate the same way the VA does?  To what advantage would be to the taxpayer and to the beneficiaries not to be able to negotiate and to get the lowest possible price?

Mr. WAXMAN.  Every insurance plan that covers pharmaceuticals negotiates for better prices using their buying clout.  What we have done is lost the opportunity to have the Government negotiate those better prices.  The only thing I can say in answer to you is that some people believed in this market theory .  They think it is going to work, and I do not think it is going to work.  The second reason is that the pharmaceutical companies did not want Medicare negotiating, because they were going to have to take less money, and there were a lot of people who did not want to disappoint the pharmaceutical companies.

In fact, two of the people involved in the negotiation of the Medicare bill went off to work for the pharmaceutical companies.  So, I think for those two reasons, I think it is unfortunate that we gave up the ability of the Government to negotiate good prices for the buying clout of seniors.

Mr. RANGEL.  There is a clear implication that the Congress, at least that part that controlled the Congress, wanted to do what was best for the pharmaceuticals rather than the beneficiaries.

Mr. WAXMAN.  Sad.

Mr. RANGEL.  Thank you, Madam Chairlady.

Chairman JOHNSON OF CONNECTICUT.  You are welcome.

Given that people who have planes to catch, we are going to move on to the next panel, but Henry, since you are on the Commerce Committee and an advocate of the best price laws to give Medicaid the best price, you should be aware of testimony we had yesterday from a national insurer saying that they had been able to negotiate prices below the best prices in the State, because we in the Medicare law allowed the circumvention of that.

So, the prices are very low.  You can see that in the State payment programs.  They are going to make more on this program than they anticipated, because their prices were higher than ours, and so, there are many ways in which everybody is going to benefit, and it is too bad that we cannot go back and forth about the details, but we do have another panel, and we need to get on to them.

Mr. WAXMAN.  Nancy, put me down as skeptical, because even the drug companies have suggested their prices are going to be higher.  We will disagree on that.

Chairman JOHNSON OF CONNECTICUT.  Well, I see in your other statements that you are not out there saying that your members should not sign up.  Your members should sign up, and you have said that very clearly.

Mr. WAXMAN.  Also, we ought to extend the deadline.

Chairman JOHNSON OF CONNECTICUT.  Thank you.

Chairman JOHNSON OF CONNECTICUT.  Next panel.

As the next panel gathers, since for most of you, your testimony was in the record yesterday as you submitted it, would you please focus on any additions to that this, so hopefully, we can get through your testimony before Members have to leave to catch their planes?

We have with us on this next panel, we have Leslie Aronovitz of the GAO; Vicki Gottlich of the Center for Medicare Advocacy; Mark Steinberg, Senior Health Policy Analyst at Families, USA; and Joyce Larkin, Vice President, Public Affairs and Community Relations at Ovations of United Health Group; and Bill Vaughan, Senior Policy Analyst at Consumers Union.

We will start with Leslie Aronovitz.

STATEMENT OF LESLIE ARONOVITZ, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

Ms. ARONOVITZ.  Thank you, Madam Chairman and Members of the Subcommittee.  I am pleased to be here today as you discuss the Centers for Medicare and Medicaid Services' implementation of the Medicare Part D outpatient drug benefit.

Given the newness and complexity of the Part D benefit, it is critical that beneficiaries and those who advise them on health care decisions understand how Part D works and the options available.  As part of its responsibilities, CMS provides beneficiaries and their advisors with information about Part D through various media, including written documents, the 1‑800‑Medicare help line, and the Medicare Website.

In our report released yesterday, we evaluated the readability of a sample of CMS' written documents, the accuracy and responsiveness of CMS' 1‑800‑Medicare help line, and the usability of the Part D portion of CMS's Medicare Website.

In summary, the written documents we reviewed were largely complete and accurate, but the way the information was presented made comprehension difficult.  According to our contractor that has expertise in preparing written materials for seniors, about 40 percent of seniors read at or below the fifth grade level.  However, we found that the reading levels for our sample documents ranged from seventh grade to post college, and once adjusted for words that CMS cannot replace with easier words, it still ranged from about eighth grade to twelfth grade level.

Also, on average, we found that the six documents did not comply with about half of the commonly recognized guidelines for good communications.  For example, although the documents included concise and descriptive headings, they used too much technical jargon and often did not define difficult terms.

In regard to the 500 calls we made to CMS' 1‑800‑Medicare help line, 67 percent of the calls were answered accurately and completely; 3 percent were answered incompletely; 18 percent inaccurately; and 8 percent were answered inappropriately given the question that was asked, and I can elaborate on that later.  Five percent of our calls were not answered, primarily because we were disconnected.

I would like to note that these accuracy and completeness rates varied significantly across the questions we asked.  For example, for the question on whether a beneficiary qualifies for extra help, customer service representatives (CSRs) provided an accurate and complete response 90 percent of the time.  The correct answer would have been to call the Social Security Administration to find out about extra help.

However, for a question concerning which drug plan is the least costly for a beneficiary with certain specified prescription drug needs, the accuracy rate was 41 percent.  In 35 percent of our calls for that question, CSRs inappropriately responded that this question could not be answered without personal identifying information, such as the beneficiary's Medicare number or date of birth, even though some CSRs answered our questions using CMS' Web‑based prescription drug plan finder tool, which was the appropriate tool to use.

Sometimes, we experienced extensive wait times before we could speak to a CSR.  For 75 percent of the 477 calls where we reached a CSR‑‑23, we did not, because we were disconnected -- we waited less than 5 minutes.  So, most of the time, we waited less than 5 minutes.  Thirteen percent of the time, the calls were answered in between 5 and 15 minutes; 8 percent of the time, they were answered in 15 to 25 minutes; and about 5 percent of the time, we waited more than 25 minutes.

Finally, in regard to the Medicare Website, we engaged a contractor with expertise in evaluating Websites, including those used by seniors.  We concluded that the Part D portion of Medicare.gov can be difficult for some to navigate.  In overall usability tests, the site scored 47 percent for seniors and 53 percent for younger adults.  Use of tools such as the Drug Plan Finder was daunting, and online forms that collect information from users were difficult to correct if the user made an error.

Further, in the evaluation of 137 detailed aspects of a Website, we found that 70 percent of these aspects could be expected to cause users confusion.  For example, key functions of the drug plan finder tool, such as the continue button or the choose a drug plan button, were often not visible on the screen unless you scrolled down.

Chairman JOHNSON OF CONNECTICUT.  Would you suspend for a moment?

Ms. ARONOVITZ.  Sure.

Chairman JOHNSON OF CONNECTICUT.  I forgot to remind the witnesses that we do have 5 minutes per witness.  You have reached your 5 minutes, but if you could just wrap up with a sentence, I am sure that in questions, we will give you an opportunity to conclude your statement.

Ms. ARONOVITZ.  I would be happy to.

Chairman JOHNSON OF CONNECTICUT.  Because people have planes to catch, I do want to observe the five‑minute rule on the podiums as I have for the Members.

Ms. ARONOVITZ.  Absolutely.

It should be noted that given the complexity of the benefit and the time allocated for implementation, CMS did face a tremendous challenge in developing its communication efforts, and we look forward to working with CMS as it continues to refine its communication tools to better serve the public.

This concludes my statement, and I am happy to answer any questions.

[The prepared statement of Ms. Aronovitz follows:]

Chairman JOHNSON OF CONNECTICUT.  Thank you.

Ms. Larkin.

STATEMENT OF JOYCE LARKIN VICE PRESIDENT, PUBLIC AFFAIRS AND COMMUNITY RELATIONS, OVATIONS, UNITED HEALTH GROUP

Ms. LARKIN.  Thank you, Chairwoman Johnson and Representative Stark and the other Members of this Subcommittee.  I appreciate the opportunity to testify before you today about the implementation of the new Medicare Part D drug benefit.  My name is Joyce Larkin, and I am vice president of public affairs and community relations for Ovations, a United Health Group company.

Ovations is solely dedicated to meeting the health care needs of individuals age 50 and over, including those who are Medicare eligible, those with lifelong chronic conditions, and those who are disabled.  I should say that prior to joining Ovations, I spent 15 years working here on the Hill for one of your distinguished colleagues, Congressman Stokes of Ohio, a real health care champion, so it is a real pleasure to be here today.

Our company has a life‑long commitment to enhancing health care for older Americans.  We do that by our participation in Medicare fee‑for‑service programs, health plans, and demonstration programs for frail Medicare beneficiaries.  As you know, Ovations is the only company to offer the Medicare Part D benefit in all 50 States, the District of Columbia, and each of the U.S. territories that has Part D programs.

Since January, we have processed approximately 50 million prescription drug claims.  Our savings projections align with what CMS has projected, roughly $1,100 per year for beneficiaries who previously lacked coverage.  As CMS also reported, we are the leading sponsors for both the Medicare prescription drug plans or PDPs and also the Medicare Advantage plans, which now have prescription drug coverage.  We believe that our experience provides an opportunity to offer insight to this panel as you continue to evaluate the Medicare drug benefit.

Well before the startup of the program, we engaged in a broad national education campaign around Part D.  Our goal was to ensure that individuals understood the benefit and how to enroll prior to the enrollment season.  As part of this effort, we developed a consumer booklet, which became known as the Show Me Guide.  We published the booklet at no cost to consumers in seven languages and distributed more than 10 million copies.

Today, we appreciate the opportunity that we have had to work with some very strong advocacy groups and Congressional groups around education.  Our partnerships have included working with the Congressional Black Caucus; Reverend Jackson and the Rainbow‑PUSH Coalition; the National Kidney Foundations; the National Medical Association; and the American Association for Services and Homes for the Aging.  These partnerships have resulted in more than 400 Medicare Part D education and outreach events around the country.  In some States, such as Illinois, we have participated in more than 50 such events.

We continue to be encouraged by the stories we are hearing every day about people receiving prescription drug coverage for the first time:  beneficiaries such as Fran Cooper, a person who was very skeptical about the program in the beginning; she is now saving money, and she is going around the country educating other beneficiaries.  Betty Noord, a Medicare beneficiary in Wisconsin, her choice was a Medicare Advantage plan, which now offers her a zero premium along with prescription drug coverage.  She is estimating that her costs have decreased from $9,000 to roughly $2,000 per year.

It is clear that implementing a program of this scale is an enormous task, and it does not come without challenges.  For United, more than 4.5 million enrollees are participating in Part D through our program; nearly 3 million of which are enrolled in our stand-alone Part D plans0.

While these numbers are impressive, we share your concern that the system has not worked well for some beneficiaries.  This includes some low‑income individuals as well as some that are dual eligible.  I can commit to you that we will continue to do all that we can to ensure that those problems and those issues are addressed.

We have done things to help beneficiaries, such as increasing our call center staff, decreasing the time that consumers have had to wait for information, deeming individuals eligible for coverage so they did not have to leave the pharmacy without their prescriptions, and working with pharmacies, independent pharmacies, retail pharmacy outlets, to make sure that the Part D experience is positive for them.  While some of our implementation challenges are behind us, we want to make sure that this benefit works well for every single consumer.

So, I appreciate the opportunity to appear before this panel today and would welcome any questions that you might have.

[The prepared statement of Ms. Larkin follows:]

Chairman JOHNSON OF CONNECTICUT.  Thank you very much, Ms. Larkin.

Mr. Steinberg.

Mr. STARK.  Madam Chair, if you could yield, I just had promised Mr. Ramstad that I would welcome Ms. Larkin on her behalf.  Her company is a constituent of Mr. Ramstad's, and Ms. Larkin flew quickly overnight to be here.  Mr. Ramstad was called away for another meeting, and I said I would welcome you and your company on his behalf.

Ms. LARKIN.  Thank you so much, Mr. Stark.  Mr. Stokes sends his regards to you and to Mrs. Johnson as well.

Chairman JOHNSON OF CONNECTICUT.  We are glad to have you, and certainly, Lou Stokes was one of our most impressive Members for many years and still highly regarded.

Mr. Steinberg.

STATEMENT OF MARK STEINBERG, SENIOR HEALTH POLICY ANALYST, FAMILIES, USA

Mr. STEINBERG.  Thank you.  Good afternoon, Madam Chairman, Mr. Stark, Members of the Committee.  I thank the Subcommittee on Health for the opportunity to present testimony today, and my remarks today are going to focus on two particular issues with implementation.  First, I want to talk primarily about enrollment in the low‑income subsidy, which we have heard already some about, and then, I will turn very briefly to the issue of prices.  I think we have discussed a great deal of that today, so I am not going to get into that in depth.

First, I want to speak about the low‑income subsidy.  This should be a happy topic.  I think all stakeholders on this issue agree that the low‑income subsidy is a real step forward for some of Medicare's neediest beneficiaries.  For those who qualify, the subsidy limits cost sharing for most beneficiaries to a very minimal amount.  Others will still have some coinsurance, but it is still substantially less than the significant cost sharing that other Part D beneficiaries have to pay.

Now, unfortunately, enrollment in this program has been so far extraordinarily disappointing.  The most recent data we have available from the Social Security Administration shows that only about 1.6 million of the estimated 7 to 8 million beneficiaries have actually enrolled in the low‑income subsidy.  That is fewer than one out of four eligible, and this is a very disappointing result.

Now, CMS has taken a positive step recently and said that they will permit beneficiaries who enroll in the subsidy subsequent to May 15 to then join a Part D plan instead of having to wait until the next open enrollment period at the end of the year, and we applaud them for doing that.  However, these beneficiaries will still be responsible for at least a partial late enrollment penalty.

Moreover, it is extraordinarily important that the Social Security Administration and other organizations use their resources to continue outreach and enrollment to low‑income beneficiaries during this time.  The other big player in this area are the State Health Insurance and Assistance Programs, the SHIPs, who have been doing work above and beyond the call of duty in the first few months, and they really need a great deal of help.

As the Chairman commented, one‑on‑one counseling is the best way to get people into the subsidy, particularly low‑income beneficiaries; there are a lot of factors that they have to weigh and to have explained to them.  SHIPs can do this job, but they need help.  Right now, they are funded at less than $1 per beneficiary, and we encourage Congress to take a look at that as well as to ensure that Social Security Administration (SSA) has all the resources it needs to do the outreach.

In addition to doing more for outreach and enrollment, there are several legislative changes that we think could help reach low‑income beneficiaries.  The first, we understand, is a big one, but the assets test could be eliminated, if not this year, in the future.  First of all, that would ease the enrollment process dramatically.  It would allow automatic enrollment for beneficiaries, because you would simply have to look at their income, which is widely available through IRS records as opposed to having to do asset evaluations.  It would also create a simpler application.

Short of that, Congress, we think, could advise that Social Security would no longer have to evaluate the cash value of a person's life insurance policy, which is currently counted as an asset, and the value of which is only obtainable through calling your life insurance company.  This has been a stumbling block for beneficiaries.  Also, Social Security continues to count in‑kind support, such as if an adult child provides housekeeping for an elderly parent, that counts as income under the Social Security rules.  We would like to see that eliminated.  We think that could ease the process significantly.

I want to talk briefly about dual eligibles, although my colleague, Vicki Gottlich, will discuss that in depth.  We know there were a great deal of startup problems at the beginning of 2006, in January and February dealing with technical problems, where the computer systems simply were not talking to one another.  Some of those problems have been alleviated, and we are pleased to see that, but there are a great deal of structural problems that remain.  We heard some today already about the differences between the Medicaid system and the new Part D system, and my colleague, Ms. Gottlich, will extend more on that.

Now, I would like to turn briefly to pricing, and I said I know we have heard a lot about it this morning or this afternoon, rather.  We actually do not know what prices Part D plans have negotiated with manufacturers.  That information is not provided.  What we know is the prices that the plans then charge to the beneficiaries.  That is what we at Families USA and other organizations have used to evaluate the prices that Part D plans have been receiving.  We assume that they must be passing some of those savings on to beneficiaries, but it could be as little as one penny; it could be as much as a large share.  We simply do not know that.

When Families USA did a study and examined what TDPs were charging in November, we found that the median prices compared to the VA were 48 percent higher for the top 20 drugs used by seniors.  If Medicare brought that negotiating power that the VA has to Medicare, we would see some comparable savings in line with that.

Finally, we have seen that prices have continued to increase.  We have looked at the top 20 drugs.  We have seen a similar increase that really is in almost lockstep with average wholesale price since November.  This means that plans are simply passing on any inflation they see to consumers, which suggests they are not seeing the kinds of savings that we had hoped they might see but have not so far.

I want to thank the Subcommittee for the opportunity to present this testimony and am happy to take questions.

[The prepared statement of Mr. Steinberg follows:]

Chairman JOHNSON OF CONNECTICUT.  Thank you, Mr. Steinberg.

Ms. Gottlich.

STATEMENT OF VICKI GOTTLICH, SENIOR POLICY ATTORNEY, CENTER FOR MEDICARE ADVOCACY

Ms. GOTTLICH.  Thank you, Madam Chairman, Mr. Stark, and Committee Members for the opportunity to testify today.  I am Vicki Gottlich, a senior policy attorney in the Washington, D.C. office of the Center for Medicare Advocacy.  The Center is a national, nonpartisan educational and advocacy organization headquartered in Connecticut.  We represent thousands of individuals in Medicare appeals, respond to calls and emails, and provide support to CHOICES, the Connecticut State health insurance assistance program.

Our written comments include examples of individuals such as the person from Florida who is not getting his HIV/AIDS drugs, who face problems that should not happen under CMS guidance.  They do happen.  The amount of time it takes to resolve problems is enormous, and not all problems can be resolved.

CMS refuses to look at systematic issues, even though acting on systems issues might be the best way to resolve an issue.  I would like to start with our client, Mary F. from Wilimantic.  SSA told Mary that she was awarded the full, 100 percent low‑income subsidy.  However, CMS told her plan that she had a partial subsidy, meaning she has to pay 15 percent copayments.  The Center got involved.  We worked with CMS.  We thought the issue was resolved, yet, last week, Mary was asked to pay a 15 percent copayment for a new drug again.  She is a low‑income individual.  She cannot afford to do this.  Additionally, she has been told that it may take up to 10 weeks to reimburse her for the payments that she has already paid in excess of what she should be paying.  She cannot afford do this.

Mary is not the only one who has encountered programs, even when they are working with the CMS caseworkers Dr. McClellan described in his testimony yesterday.  Yesterday, we heard from a 44‑year‑old dual eligible individual from Illinois who told us that he had been auto‑enrolled in a plan in December, then disenrolled and reenrolled so many times that he does not have drug coverage.  He actually has contacted the plan, CMS, and SSA; been working with them; but each program blames the other, and the problem is not fixed.  He has no drug coverage.  He has to pay $229 for drugs out of his $710 a month income.  He is not better off.

We also heard yesterday from a woman in Oceanside, California, whose autistic daughter, a dual, now must pay copayments she cannot afford to pay.  She is one of the 1 million California dual eligibles who have to pay copayments for their drugs for the first time.  In addition to the issue of copayments for dual and increased costs for duals, our written testimony talks about the Office of Inspector General study and talks about studies for California Health Foundation, which indicate that the drug coverage in Part D plans to which duals have been assigned is not extensive and does not cover the drugs that they need.

For some dual eligibles, enrollment in Part D means they may lose other health coverage.  The Connecticut Department of Social Services (DSS) asked the Center last week about duals and their dependents who are losing retiree health coverage as a result of their auto‑enrollment in a Part D plan.  DSS said auto‑enrollment results in a loss of access to health care for the duals, uninsured status for some family members, and increased cost for the State, since Connecticut will lose private insurance coverage to offset Medicaid.

I was interested, Madam Chairwoman, in your comments about the sixth‑graders who are enrolling people in the plans, because I have also had the opportunity to enroll people in plans.  It takes me at least an hour and a half to go through the Medicare Website, because you cannot just look at the lowest costs.  You have to look at utilization management tools, prior authorization, quantity limits, step therapy, which are not easy to find.  In addition, once you go through the Web finder, you have to contact the plans, and we are finding information we get from the plans is not always the same as the information on the Web.

Then, there are problems that we outline in our testimony about the exceptions process.  The Center is one of the groups that worked with the American Medical Association and America's Health Insurance Plans to develop the standard forms.  We are hopeful, but we understand that CMS guidance on these issues is not mandatory, and therefore, we are concerned that plans will not comply, which is really what happened with the transition process in the beginning of the year.  We have followed CMS' guidance and reported the problems we encountered with plans to CMS.

What we are really concerned is that CMS may not take any action against the plans.  We would very much like Congress to ensure that CMS exercises its enforcement authority against some of the bad actors that we have seen:  plans that do not cover drugs that are in the six required classes of drugs; plans that interpret a 72‑hour exception deadline as 72 business hours; plans that ignore requests for coverage determinations; plans that require doctors to fax a request form to get a request form so that they can get the exception request form that they need to start the appeals process.

Our written testimony includes numerous recommendations to various of the issues that we raise.  Our overall recommendation is to include in Part D a single standard Medicare prescription drug benefit, administered by Medicare that is uniform nationwide.  Thank you again.

[The prepared statement of Ms. Gottlich follows:]

Chairman JOHNSON OF CONNECTICUT.  Thank you.

Mr. Vaughan.

STATEMENT OF BILL VAUGHAN, SENIOR POLICY ANALYST, CONSUMERS UNION

Mr. VAUGHAN.  Thank you, Madam Chairman, Members of the Subcommittee.  If I could have my full statement put in the record, I would deeply appreciate it.

Consumers Union is the independent, nonprofit publisher of Consumer Reports.  We do not just test toasters; we try to help people with what are safe drugs and good insurance policies, and we do strongly support some major reforms of Part D, as my first paragraph in the written statement details.

Pending major reforms, there are several key issues that would help make the program work better for consumers.  We think the key to improving the current program is to make public the quality information that CMS should soon receive from the plans.  This information starts coming in in 27 days, at the end of May.

The required reporting is all detailed in manuals sent to the plans last April and finalized this January.  It is about a 12‑14 page document that lists just all kinds of data that will be at CMS.  Making this data public will let consumers make informed choices when selecting a plan, and this is particularly important this fall and next fall, when we are likely to see a lot of consolidation of plans.  Give consumers information, and they will walk away from the poor plans and reward the good ones.

CMS is to be congratulated for requiring an extensive set of data and proposing even more data for next year.  Yet, data collected but not made public does nothing to empower consumers.  The attachments to my testimony detail our efforts to nail down what data will be available and when, and we thank CMS for working on this at a very high level with us.  On April 25, we received a letter, and it is attachment number three in my statement with the CMS logo on it, and I would urge you to look at the bullet points in that letter.  Frankly, they are kind of disappointing.  The first bullet, the call center data, will be interesting, but the other three bullets mentioned in the letter seem, well, frankly kind of givens.  Of course, those other three items should be happening, or a plan should not be allowed to continue in the program.

So, therefore, we urge the Subcommittee to request that in addition to call center performance data that CMS make information public as soon as possible on the generic dispense rate, the number of grievances and appeals filed per thousand people, the resolution of those, pro or con the consumer, and the number of prior authorizations, step therapy, tier, and nonformulary exception requests received per thousand enrollees.  That would really help consumers.

We are not asking for new data.  This is information that Medicare is already scheduled to collect starting at the end of the month.  We are simply asking that it be made public.

Switching subjects, we are pleased that the Administration frequently mentions, as Dr. McClellan did yesterday, Consumer Union's efforts to educate the public about safe, effective, and lower‑cost generic drugs.  This is part of our BestBuyDrugs.org campaign, and I have attached a sample of that work at the back of my statement.  We hope you will let your constituents know about it.  It is a free service, free, really good stuff.  If you would like samples for a town meeting or event, we would be happy to provide them.

As the Administration says, if people aggressively use these kinds of shopping guides, they can save thousands and thousands of dollars.  That is true, whether you are in Medicare or out of Medicare, whether you are a 20‑year‑old or a 64‑year‑old, it does not matter.  You can save a lot of money through the aggressive use of generics.

CMS is to be commended for its recent guidance designed to stabilize formularies while encouraging the move towards generics.  No action was taken, however, on the serious problem in many plans of constantly changing costs of drugs that are on the formulary.  We think consumers need to be told more clearly that if they enroll in a percentage copay plan, they are likely to see a great deal of instability.

We have been monitoring five drugs in five ZIP Codes in big States for the last four months and are pretty shocked by the amount of movement.  Sometimes, it is downward, which is great for consumers.  Sometimes, it is up.  There is a lot of movement, and I think a lot of seniors will feel that is a kind of "bait and switch" or "gosh, why did I spend so much time shopping when it keeps changing on me?"

So, if CMS could publicly say, "In this plan, X percent of the drugs changed during the last year," it would help people select whether they want stability or whether they are willing to have an adventure when they go to the drug stores.

Thank you very much for your consideration of these recommendations.

[The prepared statement of Mr. Vaughan follows:]

Chairman JOHNSON OF CONNECTICUT.  Thanks very much.

Thank you very much, Mr. Vaughan, for those practical suggestions.  I think all those things are worth our attention.

Ms. Gottlich, just to move through quickly, do you think that drugs are an entitlement under Medicaid?

Ms. GOTTLICH.  Under Medicaid?

Chairman JOHNSON OF CONNECTICUT.  Yes.

Ms. GOTTLICH.  Do I think that drugs are an entitlement under Medicaid?

Chairman JOHNSON OF CONNECTICUT.  Correct.

Ms. GOTTLICH.  I think that health care is an entitlement to everyone, but‑‑

Chairman JOHNSON OF CONNECTICUT.  I am talking about under the law.

Ms. GOTTLICH.  Yes, I do, actually.  There are drugs that are required under Medicaid, and some are optional.

Chairman JOHNSON OF CONNECTICUT.  Let me make clear that under Medicaid that drugs are an optional benefit that States may offer.  Let me also make clear for those of you who think that the State programs are so terrific that in California, you can have a maximum of six prescriptions a month.  Think what that would do to seniors.  Think how much better off seniors on Medicaid are‑‑

Ms. GOTTLICH.  Mrs. Johnson, when we raised this issue with advocates across the country, they cheer when we say that Medicaid beneficiaries, dual eligibles are worse off.  At a meeting of the National Academy of Elder Law Attorneys two weeks ago, before 300 people, when I made that statement, people cheered.

Chairman JOHNSON OF CONNECTICUT.  Ms. Gottlich, if you will suspend for a moment, I am making some comments.  I want to move through my time and not use more than my 5 minutes.

Ms. GOTTLICH.  Okay; that is fine.

Chairman JOHNSON OF CONNECTICUT.  The point that I am making is that Medicaid program after Medicaid program in this country limits the number of prescriptions, limits the dollar value those prescriptions can cost.  Medicare Part D is the first entitlement to prescription drugs that any poor group, much less any group, have had under a publicly funded policy, and I am very proud of that.

As many of you have pointed out, it is a very important step forward.

Ms. GOTTLICH.  Let me point out to you that the State of Connecticut is one of the few States that has decided with State funds to reimburse‑‑

Mr. ENGLISH.  Regular order.

Chairman JOHNSON OF CONNECTICUT.  I appreciate that, and I like that, but not all of the States have offered to do that.  It is also true that our taking on the drug costs of Medicaid‑eligible seniors is going to save States a lot of money, and I hope they will use it to do what Connecticut and Pennsylvania and other States have done; that is, to accommodate the level at which subsidies phase out.

So, we go above the 150 percent of poverty mark up to 225 percent of poverty mark, and this Subcommittee made all those States' payments count so that none of those people are ever affected by the cap.  That is the opportunity the States have to use the money we are saving them, not only under Medicaid but for their State retiree, State employee retiree programs, which we also subsidize.  So, this is a big win for States.  They have an opportunity to adjust that spend‑down level, and I hope that they will take it.

Now, there are a couple of other points I wanted to make.  First of all, Ms. Larkin, thank you very, very much for the aggressive efforts of your company in outreach.  Indeed, the partnerships that you have established, I think it is fair to say, are partnerships that United has never established in reaching out with their regular health care plans; is that not so?

Ms. LARKIN.  It is correct.  One thing we found about Part D is‑‑

Chairman JOHNSON OF CONNECTICUT.  Unfortunately, I have very little time.

Ms. LARKIN.  Okay.

Chairman JOHNSON OF CONNECTICUT. So, I just wanted to note that about your testimony, that you have developed, and you have helped us develop, a depth and breadth of partnerships.  You mention working with Jesse Jackson; absolutely wonderful, and he says over and over again on the radio, sign up.

On the other hand, Ms. Aronovitz, I do find some of the things that GAO did really quite questionable, and I will only have time probably for one comment, but the way you judged readability, it seems to me inferior to the way CMS dealt with readability.  The traditional testers of readability rely heavily on counting syllables:  deductible, formulary, prescription, all those words have multiple syllables, and they come out poorly by those raters.

If the test is also looked at from the kind of criteria that companies that specialize at looking at the clarity of message, navigational clues, and graphic elements, then, it is very clear, and the CMS has won national awards for the quality of their work.

Now, unfortunately, you are not going to have time to answer, because as Chairman, I wanted to flip through a lot of comments that were made, and I have to stay to my 5 minutes. I will listen to the comments of others, and afterwards, I will be happy to listen.  I do feel we have to conclude the hearing so that people can get on their planes.

So, I will yield now to Mr. Stark.

Mr. STARK.  Thank you, Madam Chair.

I did want to make some semantic corrections.  Once Medicaid offers a prescription drug program, it cannot be revoked, and so, therefore, it is an entitlement, and every State in the union has offered drugs under Medicaid, and therefore, it is an entitlement.  On the other hand, Part D is not an entitlement to drugs.  It is an entitlement to purchase insurance, and there is a vast difference between that and the entitlements as we know them under Parts A and B.

I would like to follow up with Ms. Gottlich.  In terms of the low‑income seniors, who we are mostly trying to help, do you think, given, as I think, the only option that we have in 2006 is the possibility, remote as it seems now, for an extension of the signup period.  For the very low‑income, it looks like they will be accorded that and not have to pay the penalty.  Is that sufficient to deal at least with the lowest income of our prospective beneficiaries?

Ms. GOTTLICH.  Well, Mr. Stark, Mr. Steinberg and I have had a conversation before the hearing began, and though CMS has said or indicated that the very low‑income people would not have to deal with the penalty, we have not seen anything in writing from CMS, and so, if you have anything in writing from CMS that they would not have to pay a penalty, we would appreciate that.

We are hearing from people‑‑yesterday, I got a call from someone in Nevada who cannot get an appointment with his State Health Insurance Assistance Program by May 15, because they are all booked up, which means that individual may have to choose a plan without having the assistance he needs, and he may not be in the best plan for him.  Extending the deadline certainly would help somebody like that who is making the efforts that he needs to make.

Mr. STARK.  Thank you.

Ms. Larkin, Mr. Vaughan suggested, and I concur, and I hope the Chair would join with me in requesting of CMS that the nonproprietary financial information, except the other information that will be required from the major plans in terms of appeals and this sort of thing, do you see any objection to our having that information as part of our continuing oversight activities?

Ms. LARKIN.  I do not, Mr. Stark.  I think because this program is new, the amount of information, including the financials and what it has taken to administer the program is important to this Committee, so we do not.

Mr. STARK.  Okay; do you think‑‑my guess is, and I just want to make sure‑‑that some of the plans might not be very comfortable with some of the income and expense requirements, but‑‑

Ms. LARKIN.  I cannot answer for all‑‑

Mr. STARK. I do know as it would help us.  I am not sure that is our role, but the interest that we would have and I think that Mr. Vaughan is suggesting is how difficult is it for people under appeal to get a drug that maybe they have to go back to their physician and come back and how much time, and that sort of information, as far as you are concerned, you would feel comfortable with our having as part of our oversight program.

Ms. LARKIN.  We would.

Mr. STARK.  I appreciate that answer, and I hope, Madam Chair, that we could get that and, as Mr. Hulshof has suggested, I think we could deal with it in camera if necessary but in a nonpartisan way to find ways where we might choose, after the election, to see whether there would be minor changes in the program.

I wanted to ask Mr. Steinberg if you thought that the extension of the signup period, say, until 2007, as many of us have suggested, would do much to expand the participation in the program.

Mr. STEINBERG.  I think it would help.  I think it would, if nothing else, make the message much easier.  Right now, if we have enrollment for low‑income people after May 15 but not for others.  It becomes a more complicated message for beneficiaries.  If there is a simple, clear message saying you have more time, everyone has more time, we could reach more beneficiaries, particularly the neediest, who really could be helped by this program.

Mr. STARK.  I want to thank you.  My time is about up.  Thank you, Madam Chair.

Chairman JOHNSON OF CONNECTICUT.  Thank you.

Mr. Johnson, would you like to question?

Mr. JOHNSON OF TEXAS.  Yes, thank you.  Thank you, Madam Chairman.

I would like to ask the GAO, I know you were invited to our meeting yesterday, and then, the minority pulled your invitation.  Why were you invited today?

Ms. ARONOVITZ.  Well, I am not exactly sure why I was invited or not, but I think we do have a very important message, and I think we have done a study that has very high integrity, and if you have a minute, I would like to respond to the Chairman's comment, because I do think that more explanation is required.

Mr. JOHNSON OF TEXAS.  In what area?

Ms. ARONOVITZ.  This is the area of the written materials, where there was some concern about our methodology, that we used a readability methodology that was one that was not accepted in the field.  I would like to just say that we were very conscious of the fact that some experts do not believe that readability, as we defined it, was sufficient in terms of really looking at grade level.

The first thing we did to make sure that we had the highest integrity in our work is that we adjusted for 26 words that CMS told us they could not substitute.  So, our studies and the scores that we report are adjusted for making words like deductible, formulary, prescription, insurance, one‑syllable words.  We are treating it like it is an "and" or a "the."

Mr. JOHNSON OF TEXAS.  Are you suggesting that the American public does not know how to read?

Ms. ARONOVITZ.  No, I am not.  I am suggesting that in studies where you do readability studies, one of the criticisms is that when you have multisyllabic words, that it complicates comprehension.  Well, we made up for that.

Mr. JOHNSON OF TEXAS.  You are criticizing our school system, our educational process, not the questionnaire.

[Laughter.]

Mr. JOHNSON OF TEXAS.  I think that is enough.  I would like to ask a different question.

Ms. ARONOVITZ.  Okay.

Mr. JOHNSON OF TEXAS.  Of United, you also were invited and declined and then said you would come yesterday, and then, you did not.  Now, can you tell me why you are here today?

Ms. LARKIN.  Well, I apologize for scheduling difficulties that may have occurred.  Part D is important to our company, and so, we are pleased to be here today, and we will come back as often as the Subcommittee needs.

Mr. JOHNSON OF TEXAS.  I appreciate that.  I appreciate your testimony as well.

Consumers Union, you guys publish a magazine, do you not?

Mr. VAUGHAN.  Yes, sir.

Mr. JOHNSON OF TEXAS.  From what I can tell from some of your comments, you are telling people that if they buy your magazine, they can find out how to get cheaper drugs; is that true?

Mr. VAUGHAN.  No, that is a free service.  The BestBuyDrug.org, you do not have to buy that at all.  We got a separate grant from the Engleberg Foundation and the National Library of Medicine out at the National Institutes of Health to help take this best evidence‑based medicine that is being developed out in Oregon Health and Science University, where they look at what is the safest and best drugs; they avoided Vioxx and that kind of thing.  The reports that come out of there are written in doctor Greek.  They are very complicated.

So, what we do is we translate them into one‑syllable words, and then, we match a price, a national price, and then, we look and say this is safe, this is effective, and this is the best price.  If you look at the last sheet, sir, you will see why maybe the purple pill ads that you see on TV are not the best deals for you.

Mr. JOHNSON OF TEXAS.  Okay; thank you, and I would just like to make one other comment as concerns the extension of time.

You know, yesterday, one of the guys said maybe we ought to extend Christmas to January 1 so we could finish our shopping before the deadline, and that is exactly what we have in this situation.

Thank you, Madam Chairman.

Chairman JOHNSON OF CONNECTICUT.  Mr. English.

Mr. ENGLISH.  Thank you, Madam Chairman.

Mr. Vaughan, it is a privilege to have you here, because I am very familiar with your publication.  I do intend to review in detail your recommendations.

I guess my first question is if we adopted all of your recommendations, what impact would that have on the pricing of this particular benefit, including the cost of the premium as you might estimate it or the cost to the taxpayer?

Mr. VAUGHAN.  All of this information is already coming in to CMS.  The plans, when they signed up, committed to deliver this.  These are deliverables.

Mr. ENGLISH. So, it is really a transparency issue.

Mr. VAUGHAN.  It is a transparency issue.  I think what you would get is you would get consumers saying well, I am not the only one who had trouble, and my neighbors did, but this plan over here is better, and there is less hassle, and I am going to move to that guy.  Their generic dispense rate is better, and it is a better deal.  You would have informed consumers rewarding the good players and avoiding the turkeys.

Mr. ENGLISH.  Well, as someone who supports a choice‑based model for health care and who thinks that providing choices for people, provided that they get the consumer information is a preferable model and allows people to customize their benefits, I like your suggestion, and I am very much going to follow through with it and also consider following through with CMS on it.

Mr. VAUGHAN.  Thank you.

Mr. ENGLISH.  I guess my other questions have to do with‑‑your contention is that the benefit is costing seniors money at some level is my reading of your testimony.  How do you react to the recent figures showing that on the average, seniors will save $1,100 under the benefit?  Do you support the figures that we have that suggest that those eligible for low‑income subsidies will save about $3,700 on the average?  Are those savings not fairly substantial for a benefit of this sort?

Mr. VAUGHAN.  Absolutely, sir.  I think those numbers are correct.  The question is that within 24 months, this Subcommittee, under Title VIII of the Medicare Modernization Act (P.L. 108-173), is going to have to vote for major, major, major cuts in Medicare.  We think you can get a better price for pharmaceuticals, a better drug program, and as you face this Title VIII forced vote because of the 45 percent rule, please do not shift more costs onto the seniors and the disabled, when we can get a better price for drugs than we are currently getting, that is what we are urging.

Mr. ENGLISH.  I take your point, but I also do not think that that is the draconian choice that we are facing.  I really think there are a number of ways that we can deal with it.

I also am curious about your reaction to the fact that premium costs are clearly substantially below what the original estimates were.  We were operating off of an estimate that premium costs were going to be in the range of $37 per month, and in fact, they have turned up at $25 a month, and in some cases, people are eligible for‑‑particularly in the low‑income category, for savings, like I said, around $3,700 with no gaps in coverage.

I wonder, is that not a fairly comprehensive benefit?

Mr. VAUGHAN.  Well, absolutely, but again, this is a new $8 trillion unfunded liability in the long run.  Could we get a better deal?  We are trying to get consumers and taxpayers the best buy.

Mr. ENGLISH.  I take your point.  Honestly, Mr. Vaughan, given the fact that we have set up a benefit in which the networks themselves are seeking discounts, in which they are going to be under market pressure to generate savings?  They are able themselves to engage the pharmaceutical companies.

You know the curious thing about this whole debate is the notion that there is no negotiation going on.  In fact, there is evidence of lusty negotiation.  We have hospitals now who are lobbying us to be guaranteed the same prices that these plans have been able to leverage out of the networks.  So, I guess what I see out of this is some expect points, some excellent points consistent with the difficulty of implementing this comprehensive plan, consistent with the experience that not a lot of people have this length of institutional memory, not even Mr. Waxman, but it seems to me that back in the 1960s, when we were implementing the original Medicare plan, we have a lot of the same pains, and that was not really an argument against Medicare itself.

Do you have any other comment on that?

Mr. VAUGHAN.  I think all large Federal programs have a rocky start, and it is a matter of trying to get them to work better very quickly.  Oversight hearings like this are key to it, because it does catch the agency's attention, and I commend you for it and hope you can do more.

Mr. ENGLISH.  Thank you for your recommendations.

Mr. VAUGHAN.  Thank you.

Mr. ENGLISH.  Madam Chair.

Chairman JOHNSON OF CONNECTICUT.  Mr. Doggett.

Mr. DOGGETT.  Thank you.

Ms. Aronovitz, thank you so much for your professionalism and the way that your study was conducted.  If I understand, one of the findings that you made that has not received attention here today on what I consider to be perhaps the most critical and basic question:  when calls were made by the GAO to Medicare to ask the simple question of which plan will offer the lowest cost for individuals who have a given list of drugs, if I understand your findings, in about 60 percent of the cases, the vast majority of the cases, the information that they received from Medicare was either incomplete, inappropriate or inaccurate when you add all the subtotals.

Ms. ARONOVITZ.  That is correct.

Mr. DOGGETT. I find that to be really troubling.  You know, until some of the comments that were made here this afternoon, I thought that all of those who professed an interest in a nonpartisan, objective, professional, exploration of this problem were talking about you and your study, because the GAO is that independent, nonpartisan group that does studies like this.

Yesterday, I asked Dr. McClellan about this.  By the way, under your process, unlike me and the Members who requested this, Dr. McClellan has had weeks in which to respond to your study, has he not?

Ms. ARONOVITZ.  Well, actually, we‑‑

Mr. DOGGETT.  He has a letter in here, in your report.

Ms. ARONOVITZ.  Yes, he does have a letter.  CMS was very, very good about responding very quickly.  We wanted to be able to have the report ready.

Mr. DOGGETT.  He has had a chance to see your findings and to react to them.

Ms. ARONOVITZ.  Yes, and we did discuss them with him, yes.

Mr. DOGGETT.  Okay; and he has, I think, about a 12‑page response here to your report.

Ms. ARONOVITZ.  That is the part we printed, yes.

Mr. DOGGETT. I guess what bothers me the most is just the total state of denial at Medicare that they have a problem.  It looks to me like a 61 percent failure rate in answering the question that not some senior who is suffering from illness and some form, perhaps, of debilitation who is trying to struggle through Medicare but people who were trained to make these inquiries, they got the wrong answer the majority of the time, the vast majority of the time, and we find at Medicare and with its apologists and defenders of the bureaucracy and here on the Subcommittee, an unwillingness to look at your findings, because the first way to solve this problem is a recognition that there has been a failure and then to reach out and make the changes to try to do it.

Let me ask you this:  part of this state of denial that we heard yesterday was that, well, gee, a significant number of people, 87 percent, think that they are happy with the way‑‑they are satisfied with Medicare.  How does that number, which sounds so happy and so consistent with the kind of pollyannish attitude that has been brought about this legislation, how does that square with what you found?  Because it seems to be just the opposite.

Ms. ARONOVITZ.  Well, actually, I was very surprised at Dr. McClellan's comment yesterday that he thought that the problems that we found have been fixed.  I had actually been dealing with high level officials in his agency, because they were very anxious to get the detailed results of our report.  People in his office were very anxious to look at our report and try to fix things.

So, it did surprise me, to say the least, to hear him say that things were fixed.  One of the criticisms that he particularly mentioned yesterday was about the question that you talk about:  60 percent could not get an answer when we called, out of 100 calls, for the lowest drug plan.  Dr. McClellan said that 35 percent -- the category that we call inappropriate -- that we were not fair in reporting that, because when you pick up the phone and call 1‑800‑Medicare, the fact that the Center for Scientific Review insisted on having personal information before they would answer your phone call, Dr. McClellan said we should not hold that against the agency.

In fact, there is no difference between the information that you should be able to get through a general search‑‑

Mr. DOGGETT.  Of course.

Ms. ARONOVITZ.  ‑‑than if you were to give your personal information.  The only difference, really, is that the system would know whether you had prior drug coverage or not.

So, we feel that we are trying to be objective, and we have no reason to try to do anything but use very accepted methodology.

Mr. DOGGETT.  Thank you, and if there is another round of questions, I would like to hear more from you, because I think this study really tells us about the actual current state on an objective, professional basis of what is happening in Medicare, even though there seems to be a general state of denial about it.

Ms. Larkin, just in a word, does United agree with what Mr. Steinberg was saying, that it would be desirable to eliminate the assets test or significantly simplify it so we could help more of the people that rely on this low‑income

subsidy?

Ms. LARKIN.  We are finding that seniors are struggling to complete the paperwork.  We have been working with organizations like the Medicare Rights Center, who have expertise in helping people get through the paperwork.  So, that is an area that we are concerned about.

Mr. DOGGETT. You would like to see the change made on the assets test.

Ms. LARKIN.  Well, again, that is a decision for CMS and this body to make, but we would be willing to be helpful in that way.

Chairman JOHNSON OF CONNECTICUT.  Thank you.  I am sorry.  The time has expired.

Mr. English.

Mr. DOGGETT.  Thank you.

Chairman JOHNSON OF CONNECTICUT.  Mr. Hayworth.

Mr. HAYWORTH.  Thank you, Madam Chairman, and again, thanks to all the witnesses.

Mr. Vaughan, I appreciated your evaluation, and visiting with my friend from Pennsylvania, that most major Government programs get off to a rocky start.  I read with interest one of your comments earlier this year, quote, January is going to be very, very tough on some of the most vulnerable people in our society, you told the Nation's Health.  That was your evaluation.

Now that winter has moved to spring and that events do not occur in a vacuum, have there been positive steps, or is this just uniformly a horrible situation that continues to subject seniors to tests draconian in nature to give‑‑

Mr. VAUGHAN.  No, of course not.  Things do get better.

Mr. HAYWORTH.  Good.

Mr. VAUGHAN.  January was tough, and as Vicki and Mark are saying, there is still‑‑

Mr. HAYWORTH. I thank you for that, and that leads to a larger question, because listening to some of the testimony today, which offered some constructive criticism and some evaluations that can only be described as shrill, let me just simply ask for a show of hands, who among you would like to see the prescription drug program under Medicare abolished?

Let the record show that not a single hand went up.

Let me also point out in closing my brief comments that while we appreciate informational hearings, we also should recognize, and indeed, we would be naive in ignoring another fact; that is, the essence of political theater.  Brother Aesop offered a fable not dealing so much with a medical condition but perhaps something that is even shown in policy analysis about sour grapes.

While we hear about the inadequacies of the program and how horrible it is going to be, I dare say that it is my evaluation, both in terms of public policy and politics, that oftentimes, constructive criticism gives way to a simple matter of sour grapes, and with that culinary observation here, Madam Chairman, I will yield back my time.

Chairman JOHNSON OF CONNECTICUT.  Mr. Hulshof.

Mr. HULSHOF.  Thank you, Madam Chairman.

Ms. Aronovitz, let me ask, I have tried to find the cut‑off date for which GAO received data or at least written documents, and I think what I can find is the critique is of written documents in existence as of December 2005; is that right, or am I missing something?

Ms. ARONOVITZ.  No, no, that is correct.  Those are the documents that were used primarily to communicate the program.

Mr. HULSHOF.  Obviously, you have to have a cut‑off point at some time so you can begin to formulate the report that you have been asked to comment on, so any improvements that CMS might have made, say, for instance, in February or beyond would not have been included necessarily in this report?  Is that fair?

Ms. ARONOVITZ.  CMS had written and produced 70 documents by the time of December 2005, and it was really gearing up, and it had a big job.  It had substantially finished its communication materials, and those were the ones that were communicated.  Now, of course, they could have developed something since.

Mr. HULSHOF.  All right; thank you.

I am told that reality shows are popular, and so, a couple of real world‑‑I am told simply because, Madam Chairman, you drive such a hard‑charging Committee that we do not have time to watch the networks out there.  So, just really a couple of real world observations.  Number one would be I guess I am the most junior Member on this Committee; in other words, the closest one to election back nine years and five months ago, and I am only thankful that I did not have someone looking over my shoulder to see my constituent mail service two months after I became a Member of this Body.  Hopefully, over these nine years, things have been ironed out. 

Mr. Vaughan, I reference and I applaud your testimony, the written part, that you are encouraging beneficiaries to report on their Part D experiences, good or bad, with your Share Your Story Website.  Again, perhaps, a real world observation, at least from the political lens, my guess is you are going to have more negative responses than positive.

Mr. VAUGHAN.  Absolutely.  There are some real horror stories that hopefully we can get fixed.

Mr. HULSHOF.  Because if you open up the opinion page of my hometown newspaper, there are some fairly critical observations from time to time about yours truly, and so, I always know when I am not doing a good job, because you are motivated to write.  So, again, I applaud that, but the caveat I would have is that you are probably going to get mostly a negative bit.

Mr. VAUGHAN.  I do think that to the extent that we finally get a scientific sample that is large enough that we can then identify X, Y, Z plans and problems thta need to be fixed.  The issue of people thinking they are joining a relatively cheap plan and then finding out that they were enrolled in one that is much more expensive and it is being withheld from their paychecks that I believe has been referred to the Inspector General, that may be a pattern that you ought to penalize and criminalize, because there is a bunch of that out there, I think.

Mr. HULSHOF.  Thank you.

Again, just a real world observation.  I think I am one of the few Members of this Committee, the full Committee, the tax‑writing Committee that does my own taxes for our family and for our family business; a family friend who is an accountant his head at that very fact.  Quite frankly, regarding this May 15 deadline and comparing it to the tax deadline, I cannot recall a year that I ever filed my taxes early.

So, again, we have got a few days left, and we will see how that resolves itself, but let me ask Ms. Larkin, you, specifically, since you are representing a company that is actually providing some of these plans, my colleague from Texas asked you about the assets test.  Do you, on behalf of your company, have an opinion about whether that May 15 deadline should be extended?

Ms. LARKIN.  No, we are going to respect the right or respect the opinion of CMS and this Congress.  We are doing everything that we can to assist beneficiaries with this enrollment process.  It includes things like making sure that our call centers are open 24 hours a day, that we are properly staffed, so that people who are enrolling, whether they are enrolling telephonically online or with paper application can be accommodated.

Mr. HULSHOF. My last final little real world observation.  In our household, Ms. Gottlich, I have a six‑year‑old and a three‑year‑old, and every night, they are back in Missouri, and we talk on the telephone, and I ask my six‑year‑old, who is quite verbose, to share with me her high point of the day and low point of the day.  So, as we sort of bring this hearing to a conclusion momentarily, you have shared with us some of the horror stories and negative stories.  How about sharing with us a positive story.

Ms. GOTTLICH.  My father‑in‑law took my advice, and even though he has only a $13 generic drug payment each month, he signed up this week for the lowest cost plan in New York.  Now, if you knew my father‑in‑law, and you knew that he does not take anybody's advice, this is really a high point in Part D.

[Laughter.]

Mr. HULSHOF.  Thank you.

Thank you, Madam Chair.

Chairman JOHNSON OF CONNECTICUT.  I thank the panel.

I am going to recognize a Member of the Committee who is not a Member of the Subcommittee, Mr. Pomeroy.

Mr. POMEROY.  I thank the Chair, and I am delighted to participate in this hearing.

Gosh, Congressman Hulshof, I cannot imagine where your six‑year‑old got that verbosity trait.

[Laughter.]

Mr. POMEROY.  You know, I will give you a good, new story, too.  I sat down with my 85‑year‑old mother, and we worked this through, and she is going to save about $2,000 out of her $4,000 drug bill.  You sign up to this thing; most are going to save money.  That is what makes the takeup rate, in my opinion, so revealing.

Paying your taxes, working on tax returns -- that is a pain in the neck.  If you do not get it done by the 15th, there is an extension.  It is easier doing when you know you have a refund at the end of it.  Well, everybody signing up, nearly everyone, is going to get a benefit under this thing.  Still, the takeup rate is really quite low, about 40 percent in North Dakota, and that is better than most of the country, in part, because Republican and Democratic officials, we have worked together to try to get the word out, try to get the people signed up.  I was doing an event just about a week ago with Commissioner of Insurance Jim Poolman, an elected Republican.  We together want to make this work.  The Governor's office has done some good work in trying to get people enrolled.

Forty percent on a program that is offering some very real benefit, in fact, a benefit that we are now finding is going to cost about double what we thought to the Treasury when we passed it, well, that tells me there is too much complexity.  I think if we were running an insurance program and had takeup rates when we were trying to give away benefit, and they are not applying for it, it would tell us, whoa, something is terribly wrong about our market interface here.  We have got to have a better takeup rate than this.

So, that is what I think we need to concentrate on.  Look at these macro numbers.  The macro numbers tell us we have got work to do.  I think we obviously want this program to work.  I think there is bipartisan agreement in that one.  Here we are, days before the 15th; we have got these low sign‑up rates.

It would seem to me that we ought to conclude a couple of things:  the program is too complex; we need to make it simpler, and in light of the complexity, which has obviously played a huge role in suppressing the takeup rate, the rate at which seniors are applying for this, we ought to give them an extension.  It is the cleanest, easiest thing to do.  Some are suggesting keep the May 15 date but drop the penalty.  My opinion, that just adds to this confusion, and by golly, there is plenty of confusion out there already.

My own view, and I have spent quite a bit of time on this thing, is we ought to extend that May 15 date.  I think people are going to‑‑once they get through the signup, they are going to like this program.

Now, Ms. Larkin, I have got a question for you, because what we learned about the bill and implementation, we realized that there were some things that frankly reflected, I think, bad judgment.  I think it was bad judgment of Congress to pass a law that‑‑by the way, I voted for; unique to the minority, I voted for this thing‑‑but I did not quite understand how this Medicaid dual eligible enrollment was going to work and that people would be randomly assigned to plans whether it covered the prescriptions they were on or not, and I am wondering what you did with your company when you find somebody automatically enrolled in something that no longer covers what they need.

Ms. LARKIN.  Well, one of the things that we have been doing with the dual eligibles in particular is meeting with them to understand they understand the new drug benefit, and communities and States like Florida, New York, Illinois, we have actually been sitting down with dual eligibles, having Town Hall meetings and making sure they understand how to use the new benefit.  We have partnered with pharmacies so that when dual eligibles come into the pharmacy, they can help understand how the drug benefit works.

Mr. POMEROY.  Is there anything that you do for those that you find have been kind of randomly enrolled in one of your low‑end plans that does not cover the drugs that they have been taking for years and have been paid for under Medicaid for years?

Ms. LARKIN.  Well, our plans, we have a standard benefit, but the dual eligibles do have the option of changing plans.  They do have that opportunity.

Mr. POMEROY.  Right, and does your information outreach advise them of that, if they need something covered that the plan that they have been randomly assigned to does not cover it?

Ms. LARKIN.  We try to make sure that they understand what is covered with our plan, how to use the new benefit and how to, at the pharmacy level, how to also use the benefit.  They are informed of the‑‑

Mr. POMEROY.  We should never have passed something that is sticking people ‑‑ known, identified individuals with known, identified prescriptions, because we have all that in the Medicaid program, sticking them into programs that do not cover what they are taking.  That was just, in my opinion, done.

You know, I appreciate very much the efforts that the State Government in North Dakota, working with the nursing homes, working with others to try to make sure that people won find themselves no longer covered get into a program that covers what they are doing, and I think this is a glitch that we all need to work on.

I would encourage all providers that are finding, those that have got coverage by virtue of being dual eligibles, but the coverage that they have got is not responding to their need, very specific feedback in terms of how they might move and get into something that covers their need.

Madam Chairman, I thank you for allowing me to ask that question of this panel, and thank you for‑‑

Chairman JOHNSON OF CONNECTICUT.  Thank you.  I also will give the Gentleman from North Dakota a letter that is more detailed on these issues from Dr. McClellan, and I urge you to have a briefing from CMS on this.  You get a glimpse of it through Ms. Larkin, but first of all, yesterday, Dr. McClellan did go into it in some detail, although it is much more interesting when you have the one‑on‑one situation of the computer interface issues and the transmission, the transfer of information issues, the problems they had between the State banks and the Federal banks and the private sector banks and how much of that they have worked out.

When we look at what works and what does not work, we may have to have a delay between the time you enroll and the time your benefit starts, because some States sort of enrolled people, and then, one State dumped 40,000, changed 40,000 from one plan to another on December 30th.  Well, of course, by January 1, they were not in the pharmacy's bank.

 So, there are problems that we now know and that do have to be worked out and may require changes in the law as well as procedures.  How much of that they will be able to change through Executive Branch authority and what they will need to change with us, this is one reason we need to observe the deadline May 15.  We need for these plans to operate, and we need to see how, then, of the slower pace of entering all those low‑income people who now have no deadline, whether or not we have got the problem straightened out or not.

So, we will need to watch what we learn after May 15, when the low‑income people can continue to be brought into this system and look at yesterday, I do not remember whether it was during the hearing or before, the representative of the Social Security Administration went through how they deem asset compliance.  Actually, she seemed very satisfied.  So, today, we get a little different view.

Those kinds of things, we will have to look at, because we do not want to ever go through again what we went through in January, February, and March.  The other thing that is impressive is that for the first time, people in Meals on Wheels -- the outreach was extraordinary.  We have never accomplished that before, and if we had not had trouble with the people in our own State computers, I think we could have concentrated on those who were not in the State Medicaid or dual eligible programs and been able to do a better job on the ones just outside of that box who are harder to reach, because they do not qualify for most of our subsidy programs out there.  Most of them do not qualify for Food Stamps or fuel assistance.  They are just above that level, and they are fairly isolated seniors.

So, that is why reaching out to family members was so important.  This deadline, you are seeing a lot of people; I am seeing people walking up to me saying gee, I did not know my mother was on so many drugs.  I am amused to hear my colleagues talk about their family members.  I had to do it for my own sister.  Somehow, she takes some pretty expensive drugs on a pretty limited income.  So, we do have to help one another.  There is no question about it, and we do have to make sure that the system is‑‑the problems are solved so that November 15, they do not start again, and January 1, they do not start again.  There are problems with pharmacists that we also have to look at, and we have gotten some very good suggestions from some of you today, and we thank you for being here.

I will conclude the hearing and thank you.

[Whereupon, at 4:55 p.m., the hearing was adjourned.]
[Submissions for the record follow:]

Alamosa Dialysis Center, Fran Koski, Alamosa, CO, letter

American College of Physicians, statement

American Medical Directors Association, Columbia, MD, statement

Brief, Cary, Campaign for America's Future, Sherman Oaks, CA, letter

Campaign for America's Future, Cary Brief, Sherman Oaks, CA, letter

Center for Medicare Advocacy, Inc., statement

Collins, Shannon, San Rafael, CA, statement

Emerick, Therese, statement

Fullerton, Linda, Social Security Disability Coalition, Rochester, NY, statement

Harrison, W. M., Durham, NC, letter

Health and Disability Advocates and Make Medicare Work Coalition, Chicago, IL, joint statement

Kennelly, Barbara, National Committee to Preserve Social Security and Medicare, statement

Kieft, Alice, Kewanee, IL, letter

Koski, Fran, Alamosa Dialysis Center, Alamosa, CO, letter

Mierisch, George, Salt Lake City, UT, letter

Miller, Jessica, Huntington, NY, letter

Muckway, Linda, Muncie, IN, letter

National Alliance on Mental Illness, Andrew Sperling, Arlington, VA, statement

National Association of Health Underwriters, Arlington, VA, statement

National Committee to Preserve Social Security and Medicare,  Barbara Kennelly, statement

National Home Infusion Association, Alexandria, VA, statement

National Kidney Foundation, New York, NY, statement

Reading, Toniann, Mill Creek, WA, letter

Rios, Elena, National Hispanic Medical Association, statement

National Hispanic Medical Association, Elena Rios, statement

Romney, Frances, West Valley City, UT, letter

Social Security Disability Coalition, Linda Fullerton, Rochester, NY, statement

Sperling, Andrew, National Alliance on Mental Illness, Arlington, VA, statement

Sutherland, Arthur, Sandy, UT, letter